INTEGRATED REPORT · 2016-03-02 · Accounting officer’s statement of responsibility for annual...

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Our developmental role and model

I N T E G R AT E D R E P O R Tfor the year ended 31 March 2015

Advancing industrial development

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Industrial Development Corporation of South Africa Limited | Integrated Report 2015

CON

TEN

TS1

SECTION 1 Our developmental role and modelCommitted to transparent reporting

Overview of IDC

Leadership commentary

SECTION 2 Material mattersImpacting on industrial development

Contributing to socio-economic development

Building strong partnerships

Committed to good governance

Impact on financial sustainability

SECTION 3 Statutory and additional informationConfirmation of accuracy and fair presentation

Accounting officer’s statement of responsibility for annual financial statements

Report of the independent auditors

Report of the Board Audit Committee

Company secretary’s certificate

Directors’ report

SECTION 4Annual financial statements

Acronyms and abbreviations

Administration

Contact information

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2942567379

90

104195196

9192949798

197Navigation informationAssurance:This refers to information that has been externally assured (limited assurance)

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SECTION 5 Supplementary online information

The following additional information is available on our website: in Section 5 online.

• Corporate governance Governance approach, Board of directors, Board charter, Company secretary, Board meetings and meeting attendance,

Rotation of directors, Board assessment, Delegation of authority, Delegation of credit approval, Board committees, Board Investment Committee (BIC), Human Capital and Nominations Committee (HCNC), Report of the Board Human Capital and Nominations Committee, Remuneration policy and philosophy, Remuneration report, Board Audit Committee (Audit Committee), Board Risk and Sustainability Committee (BR&SC), Governance and Ethics Committee (GEC), Executive Management Committee (EXCO), Ethics and managing directors’ conflicts of interest, Governance training and assessment of clients / investee companies, Centre for corporate governance

• Risk management Focus areas, Embedding a robust risk culture, Strategic support

• Internal audit Background, Role of internal audit, Internal control framework, Authority and competence, Management’s responsibility

for risk management and fraud, Key focus areas during past year: both audit and forensics, Stakeholder engagement, Risks, Focus points for the year ahead, Fraud prevention

• Information technology Strategic initiatives, IT alignment, IT governance and risk management

• Procurement Supplier assessment for labour practices and local procurement

• Special funding schemes

• Memberships

• Community development

• Customer relationships management

• King III checklist

• GRI table

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SECTIO

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Our developmental role and modelCommitted to transparent reporting

Overview of IDC

Leadership commentary

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Committed to transparent reporting

The IDC is committed to and fully embraces the principles of

integrated reporting. Accordingly, the 2015 Integrated Report

largely demonstrates our continued commitment to integrating

sustainability across our organisation and its subsidiaries.

When referring to “IDC”, “we” or “our”, we mean the Industrial

Development Corporation and our subsidiaries Findevco,

Impofin and Konoil.

Following on the Global Reporting Initiative Guidelines 4

(GRI G4) adopted in our 2014 report, this report covers our

financial and non-financial strategy, performance aspects and

prospects for the financial year 1 April 2014 to 31 March 2015.

In addition the report covers the five material aspects identified

as core to IDC business. These material matters were established

in line with GRI principles and tests of materiality and relevance.

Doing so ensures that the matters identified are sufficiently

important concerns, which could substantively influence

the assessments and decisions of stakeholders. This process

involved the analysis of the following internal and external

factors:

• Significant risks to the IDC as defined by our Enterprise Risk

Management (ERM) process

• Concerns and expectations of our stakeholders

• Review and benchmarking material industry-wide issues

• Review by IDC, Executive Management Committee (EXCO)

• Advice from external specialists

Reporting boundaries are further refined for each material

aspect. In preparing the report, management considered the

integrated reporting guidelines provided by the following:

• South African Report of Corporate Practice (King III Report)

• The principles of the GRI G4, in accordance with the

guidelines at core level

• Discussion paper issued by the Integrated Reporting

Committee (IRC) of South Africa and the consultation draft

of the International Integrated Reporting Framework issued

by the International Integrated Reporting Council

• Companies Act, No 71 of 2008 as amended

• International Financial Reporting Standard (IFRS)

• Internally developed guidelines and policies

• Public Finance Management Act, No 1 of 1999 as amended

• Industrial Development Corporation Act, No 22 of 1940 as

amended

Similar to our previous reports, a combined financial and non-

financial assurance team from KPMG and SizweNtsalubaGobodo

(SNG), supported by the IDC’s internal audit team, again

adopted a combined assurance approach to the information in

this report.

In addition to the annual financial statements and opinions

included here, selected sustainability information was assured

at a limited assurance level according to the International

Standards for Assurance Engagements (ISAE 3000), assurance

engagements other than audits and reviews of historical

information. The external auditors assured the financial section

of this report. The IDC Board Audit Committee verified the

independence of the external assurance providers of the IDC.

We appreciate your feedback. Kindly submit queries and

comments to [email protected] or [email protected].

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Overview of the IDC

Our mandate

The Industrial Development Corporation of South Africa Limited (IDC) was established in 1940 by an Act of Parliament (Industrial Development Corporation Act, No 22 of 1940) and is fully owned by the South African Government.

Initially mandated to develop domestic industrial capacity, specifically in manufactured goods, to

mitigate the disruption of trade between Europe and South Africa during the Second World War, we have

contributed to the implementation of industrial policy in South Africa for 75 years. Among others, we

assisted in establishing the petro-chemicals and minerals beneficiation industries, acknowledged today

as the cornerstones of South Africa’s manufacturing sector, and in commissioning many large industrial

projects over the years. We also influenced the establishment of industries in fabricated metals, agro-

industries, and clothing and textiles, among many others, and contributed to economic transformation.

Our mandate was expanded in the late 1990s to include investments in other African countries. Projects

included the Mozal aluminium smelter in Mozambique, for which we secured investors from around the globe

to establish a major industrial enterprise in a country plagued by decades of civil war. The smelter illustrated

the viability of large projects on the continent to foreign investors. Currently, investments in Africa span various

sectors including mining, agriculture, manufacturing, tourism and infrastructure.

We generate funding through income from loan and equity investments and divestments, as well as

borrowings from commercial banks, development finance institutions (DFIs) and other lenders.

Our priorities are aligned with government’s policy direction and we remain committed to developing

and diversifying South Africa’s industrial capacity, in the process facilitating job creation, reducing

inequality and contributing to economic transformation.

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Our industrial development role

The IDC’s activities currently centre on the National Development

Plan (NDP), the New Growth Path (NGP), the Industrial Policy Action

Plan (IPAP), the Agricultural Policy Action Plan (APAP) and localisation

opportunities associated with the National Infrastructure Plan (NIP).

We identify sector development opportunities aligned with policy

objectives and develop projects in partnership with stakeholders.

We provide financing to expand existing industrial production

capacity, and to introduce new industrial operations and technologies

that contribute to strengthening South Africa’s industrial base.

One of the most important outcomes of our industrial financing

activities is the facilitation of employment creation, both direct

and indirect. Our funding also impacts on regional development,

including South Africa’s rural areas and less industrialised

provinces, as well as economies in the rest of Africa. The IDC

supports the economic empowerment of emerging black

entrepreneurs, designated groups, youth and communities, and

promotes the advancement of black industrialists.

We promote sectoral diversity, increased localised production

and environmentally sustainable growth. In addition, either

directly or through our subsidiary, sefa, the IDC supports

the development of the small and medium enterprise (SME)

segment of our economy.

While the primary focus of our funding activities is the private

sector, we work closely with various government agencies and

sector organisations to coordinate industry development. We

also support government’s developmental initiatives by means

of research and management of government funds allocated to

achieving specific outcomes.

Our focus on the continent is to contribute to the development

and integration of regional value chains by building upon the

strengths of different African economies to grow and strengthen

their industrial bases for individual as well as regional benefit.

Promoting economic growth and industrial development

Our vision

To be the primary driving force of commercially sustainable

industrial development and innovation for the benefit of South

Africa and the rest of Africa.

Our mission

The Industrial Development Corporation is a national

development finance institution whose primary objectives are to

contribute to the generation of balanced, sustainable economic

growth in Africa and to the economic empowerment of the

South African population, thereby promoting the economic

prosperity of all citizens. The IDC achieves this by promoting

entrepreneurship through the building of competitive

industries and enterprises based on sound business principles.

Outcomes

• Facilitate sustainable direct and indirect employment

• Improve industrialisation and equity in Africa and South

Africa’s rural areas, township economies and poorer

provinces

• Promote entrepreneurship and small and medium

enterprise (SME) growth

• Advance environmentally sustainable growth

• Grow sector diversity and increase localised production

• Support the transformation of communities

• Development of black industrialists

IDC_AR2015_Front Section_Draft 38_Not Quite Sign off_25 September.indd 3 2015/09/29 9:33 AM

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Our values

Strategy pillars

Financial capital

Ensuring long-term sustainability

Prioritise sectors where the

IDC plays a proactive role and

strengthen it’s development

objectives and strategies

Align the IDC with the NDP,

NGP, IPAP, APAP and NIP sector

development objectives

Increase project development

and implementation

Provide industrial finance to

achieve sector development

objectives

Increase regional industrial

integration by developing value

chains

Ensure sefa operates effectively

and efficiently

Increasing industrial development impact

Passion Partnership Professionalism

Increase measures to manage

concentration risk in the IDC

portfolio

Plan investment returns and

risk profile to ensure sufficient

growth to replace existing cash

generators

Structure investments to

increase direct equity returns

Manage risk through

appropriate investments, pricing

and portfolio management

Human resources

- Ensure appropriately skilled

and capacitated human

resources

- Entrench a culture

of performance and

development

Stakeholders

- Improve customer service

- Partner with other financiers

to leverage different

strengths and mandates

- Increase engagement with

sector players to identify

opportunities

- Develop black industrialists

- Strengthen IDC expertise to

contribute to policy

- Build strong communities

around IDC-funded projects

Natural environment

- Reduce the IDC’s negative

environmental impact

- Reduce industry’s negative

environmental impact

Utilisation of resources

- Enhance efficiency through

improved systems and

processes

Human, social, natural and manufactured capital

Everything we do is directed by our values

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Group structure

Industrial Development Corporation of South Africa Limited

Foskor (Pty) Ltd

Scaw South Africa (Pty) Ltd

Small Enterprise Finance Agency SOC Ltd

Thelo Rolling Stock (Pty) Ltd

Prilla 2000 (Pty) Ltd

Consolidated Wire Industries (Pty) Ltd Manufacturing of wire and wire products

Phosphate mining and fertiliser production

Steel manufacturing and production of steel products

Development finance for survivalist, micro, small and medium enterprises

Rolling stock leasing

Yarn manufacturer

50%

100%

50%

100%

74%

59%

Operational footprint

The IDC has offices in all nine provinces. Business activities in the rest of Africa are serviced from our head office in South Africa.

Regional offices

Satellite offices

Head office

Limpopo

Mpumalanga

Gauteng

Thohoyandou

TzaneenPolokwane

MbombelaeMalahleni

Secunda

George

Durban

Upington

Cape Town

Port Elizabeth

East London

Kimberley

Bloemfontein

KlerksdorpVryburg

Mahikeng

BritsRustenburg

North West

Northern Cape

Free State

KwaZulu-Natal

Eastern Cape

Western Cape

Pietermaritzburg

Mthatha

The following diagram illustrates the IDC Group structure in so far as operational subsidiaries with assets exceeding R250 million are

concerned. The IDC financing subsidiaries as reflected in the notes to the Annual Financial Statements are Findevco, Impofin, Konoil and sefa.

Welkom

Phuthaditjhaba

Richards Bay

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Operational structure

Chief Executive Officer

Agro and new industries

Mining and manufacturing industries

Service industries and regions

Finance and funding

Corporate risk

Professional services

Strategy and corporate affairs

Human capital

Legal and post-investment

Corporate secretariat

Internal audit

Innovation

Operational divisions Support divisions Direct reports

For the period up to 31 March 2015


Agro, infrastructure, and new industries

Mining and metals industries

Chemicals and textiles industries

Finance and funding

Corporate risk

Transaction support and post-investment

Corporate strategy

Human capital

Corporate secretariat and legal

Internal audit

Operational divisions Support divisions Direct reports

For the period 1 April 2015 going forward

Chemicals and textiles industries

High impact and regions Corporate affairs

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Our main business and funding activities

Activities Customers Business life-cycle

Sectoral involvement

Funding products

Regional involvement

Provision of

development

finance

Project

development

Research and

policy inputs

Fund

management

Non-financial

forms of

business

support

Capacity

building

Business

Government

Other DFIs

Conceptual

Pre-feasibility

Feasibility

Product com-

mercialisation

Establishment

Expansion

Mature

Metal

beneficiation

and mining

Agro-

processing and

agriculture

Upstream and

downstream

chemicals

Tourism and

film

Other

manufacturing

industries

including

clothing and

textiles

Industrial

infrastructure

including

renewable

energy

General debt

Quasi-equity

Equity

Export/import

finance

Short-term

trade finance

Bridging

finance

Guarantees

Venture capital

Wholesale

funding

through

intermediaries

South Africa

Rest of Africa

Global export

of South

African capital

equipment

Refer to Section 5 online for details of Special Funding Schemes

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2015 Highlights

R1.8 BILLIONapproved for investments in

10 other African countries

R756 MILLION approved for businesses with

women ownership of more than 25%

R5.2 BILLIONapproved for manufacturing

industry

R5.9 BILLIONapprovals for businesses with black ownership of more than

25%

R10.9 BILLIONdisbursed

20 388jobs created/saved

R11.5 BILLIONoverall funding

approvals

All the above figures exclude performance by sefa - a wholly owned subsidiary of IDC - that supports mostly black owned companies

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Shareholder commentary: Minister Ebrahim Patel

It gives me pleasure to present the IDC’s 2015 Integrated Report.

The report comes at a time when government, in celebrating

two decades of democracy, has reaffirmed its commitment to

radical transformation, building on existing - and creating new

- economic opportunities needed to realise the promise of our

democracy.

We have bold goals on job creation and inclusive growth, as set

out in the National Development Plan and its implementation

strategies: the New Growth Path jobs drivers and the action

plans on industrial policy and agriculture.

The strategies can best be summarised through six i’s:

• Infrastructure development, to lay the foundations for

growth and development, building energy plants, transport

and logistics systems, information and communication

technologies and water infrastructure

• Industrialisation, to improve the size and strengths of the

productive sectors of the economy which in turn is critical to

beneficiation of the mineral and agriculture resource base

and the growth of services sectors

• Investment, including attracting domestic and foreign direct

investment to expand the country’s productive economy

and smart industrial funding partnerships by public entities

with the private sector

• Innovation, to bring new ideas and the products of research

and development to economic activity and provide

opportunities for, and an incentive to grow the quality of,

our skills base

• Inclusion, to enable more South Africans to benefit from

growth that creates decent work opportunities, that

supports small business development, draws young people

into the economy and promotes broad-based economic

empowerment; and

• Integration, through increased trade and investment on the

African continent, building a larger consumer market for our

goods and services.

These six areas are connected: inclusion is not simply about

ensuring a fair sharing of the fruits of growth, it is also a source

of growth when millions of people are lifted out of poverty and

become active economic contributors; integration provides

the economic logic for deeper levels of investment into our

industrial base and infrastructure.

Achieving these levels of growth requires the IDC to be more confident

in driving a developmental agenda in investments and unlocking game-

changing industrial opportunities. Indeed, the IDC continues to take up the challenge of increasing funding

levels biased towards unlocking jobs-rich industrial activities, addressing

other developmental outcomes such as the development of black

industrialists, whilst also remaining financially sustainable.

The manufacturing sector remains key to government’s plans

for economic development. It is encouraging to see that the

largest portion of IDC’s funding for 2015, R5.2 billion, was

destined for the manufacturing sector. Continued support for

this sector will be critical if South Africa is to achieve its job

creation goals. We are beginning to take advantage of the

localisation opportunities afforded by South Africa’s National

Infrastructure Plan to rebuild our industrial capacity. The high

levels of investment in industries such as basic metals and

machinery and equipment attests to IDC’s efforts in this area.

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While investing in new capacity, the country also needs to

ensure that jobs in established industries are not lost in the face

of competition from abroad. IDC continues to play an important

role in this area as well as can be seen from its continued

commitment to support industries such as clothing and textiles.

Almost five years ago, the New Growth Path highlighted the

green economy as one of the drivers for growth. The IDC has

invested over R14 billion to date in the Renewable Energy

Independent Power Producers Programme (REIPP), bringing

state muscle to help create a new industry. In addition to funding

for the core renewable energy infrastructure, the IDC has also

supported the establishment of manufacturing enterprises to

produce components for the projects. The first few of these

projects, including the KaXu concentrated solar plant and the

Kakamas Hydro Electric Power plant, are now operational. They

are delivering electricity to the grid and sustaining economic

activity at a time when the country’s generation capacity is

facing severe strain.

As the private sector develops more appetite to fund these

projects, I challenge the IDC to find other critical areas where

infrastructure development can assist industrial development

and to identify and develop the manufacturing projects that

will provide the inputs into these so that the country can reap

more sustainable long-term industrialisation while addressing

infrastructure constraints and bottlenecks.

IDC’s funding activities over this past year are expected to create and save

about 20 300 direct jobs. This is in addition to the almost 160 000 jobs

that were facilitated by its activities in the previous 5 years. These numbers

provide context to the significant impact that IDC already has in the economy and on addressing our

unemployment challenge.

Government has been working on complementing the

redistributive approach to black economic empowerment with

a model where we support the emergence black industrialists

who run their own factories, agro-processing plants, mines,

renewable energy operations and tourist establishments. This

is vital if South Africa is to tap - and strengthen - the incredible

entrepreneurial resources present amongst its citizenry.

Through its policy of focussing on expansionary black economic

empowerment, IDC has put itself in a position to leverage the

experience that it has gained to support this initiative. I am

confident that the 41 black industrialists that IDC supported

through its funding activities, amounting to R2 billion, in

IDC-supported company Semona Eco produces Eco Blaze which is an eco-conscious, healthier and safer alternative fuel-source for braais (barbecue), fire places and wood burning stoves.

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2015 will bring a new innovative perspective to South African

business. Funding amounting to R756 million was made

available to women entrepreneurs, unlocking the energy

and skills that women bring to the economy. I expect IDC to

match this success and, in addition, do much more on youth

empowerment going forward.

Small business remains important as a source of innovation, job

creation, growth, and in many instances in the local context, a

necessity as the only source of income for households. Together

with sefa, its wholly-owned subsidiary, IDC approved over R3

billion to support small and medium enterprises. This funding

will benefit more than 1 300 SMMEs.

While the annual report documents many successes in the

past year, its results reflect too the growing headwinds that the

economy faces. These include the sharp decline in the global

demand for commodities (and with it, a big drop in prices and

earnings), slowing growth in China and sluggish European

economies, domestic energy constraints and a drought that is

affecting agricultural output.

It is during times like these that development finance institutions

need to play a strong countercyclical role as demonstrated by

the IDC in this last year when, compared to previous years, it

increased its levels of funding to industries outside renewable

energy. I repeat the challenge that I put to the IDC to approve

R100 billion in new investments over the five years, which would

lift the rate of project approvals and disbursements from the

already higher base we have been able to create in the past

five years. At the same time, IDC should maintain a prudent

approach to its investment philosophy and continuously

balance decisions that influence risk and sustainability so that

development can be maximised.

This year, IDC is celebrating 75 years of existence. It is a good

moment to use its experience for bold initiatives that will help

grow and transform the economy, create jobs and bring young

entrepreneurs into the economic mainstream.

I thank the Chairperson of the Board of Directors, Ms Busisiwe

Mabuza and her Board of Directors for providing guidance to

this critical entity. I appreciate the work done by the previous

Chairperson, Ms Monhla Hlahla and the other directors who

retired during the year under review, for their dedicated service

to the Corporation. To the CEO, Mr Geoffrey Qhena, whose

term as CEO was extended recently, as well as the rest of his

management team and staff, I thank you for the service to the

organisation and the trust that South Africa has put in you to

manage this national asset in a way that supports broad-based

industrialisation to the benefit of all citizens.

Ebrahim Patel

Minister of Economic Development

August 2015

Growing the agro-processing industry is critical to the IDC because of the industry’s value chain that links into primary agriculture and its potential impact on rural development.

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Leadership commentary: Board Chairperson

From an investment perspective, the past year was one of the most challenging since the recession in 2009. Fixed investment spending decreased in real terms in most

sectors of the South African economy. The decline was pronounced in the case of private business enterprises,

which constitute the IDC’s main client base. As in previous years, the IDC’s financing activity during the review period sought to provide counter-cyclical support, particularly to the

manufacturing sector.

Our funding approvals and disbursements of R11.5 billion

and R10.9 billion respectively, contributed to stem the

contractionary tide, particularly in the productive sectors of the

economy. In the process, we achieved critical socio-economic

outcomes, especially employment creation, the preservation

of existing jobs in struggling industries, transformation and

inclusive development.

Achieving greater impact

Our Leadership in Industrial Development Strategy recognised

the need for a more proactive IDC role in broadening and

deepening South Africa’s industrial base, and integrating it with

regional economies. In the implementation of this strategy, we

contributed to the development of industries such as renewable

energy, automotive components, pharmaceuticals, film and

agro-processing. However, there is scope for making a greater

impact on the economy and fostering inclusive development.

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Our response to this opportunity is Project Evolve, which was

initiated in April 2014 and launched a year later to increase our

impact, specifically aiming to achieve the following objectives:

• A more focused approach to industrial development within

the parameters of our mandate and aligned with the

objectives of the National Development Plan, New Growth

Path, National Infrastructure Plan and Industrial Policy

Action Plan

• Improve the structure, processes, resourcing and key

performance indicators of the operating model that

supports our industrial development strategy

• Effective implementation through change management,

a robust communication strategy and better coordination

with government and other critical state and non-state

institutions

The IDC Board approved the recommendations from this crucial

strategic initiative in the second half of the past financial year,

for implementation from April 2015.

We prioritised the sectors that are expected to yield the

highest developmental returns, including industrial expansion,

competitive advantage and employment. Value chain

development will be at the centre of our new approach, aiming

to leverage economic linkages and enhance competitiveness.

We are determined to lead industrial capacity development and

improve the long-term sustainability of the country’s industrial

sectors.

In terms of the new strategic thrust, we will deepen our focus on

the following value chains: metals, metal products, machinery

and equipment, transport equipment and mining; chemicals,

plastics and pharmaceuticals; as well as agro-processing and

agriculture. We will also actively develop and support the

development of new or emerging industries that, from a South

African perspective, exhibit the potential to become jobs-rich

and competitive in the years ahead.

The IDC will continue to process and fund applications for

finance across a wide range of other sectors of the economy,

focusing on manufacturing and tourism, as long as these exhibit

economic merit and high developmental returns. This will be

done reactively, improving our accessibility and responsiveness

to potential partners and assessing applications as efficiently as

possible.

Substantially changing our operating model and structure was

necessary to implement our new approach, including changes

to business units and departments, as well as the appointment

of key personnel. Effectively implementing the plan also relies

on developing critical skills and capability for the new strategy

and change management to drive the culture change required

to deliver the IDC’s values and goals.

We are, therefore, repositioning the IDC from an institution that

has tended to be reactive to market and environmental forces to

one that is at the centre of the industrialisation paradigm.

Supporting transformation and enterprise developmentWe increased our endeavours during the past year to promote black economic empowerment, including the financing of black industrialists, women and youth-owned enterprises. Approximately R2 billion was approved for 41 black industrialists across various industries, largely within the manufacturing sector. Our target for the forthcoming financial year is R3 billion.

The value of financing approvals for enterprises with significant women ownership (more than 25%) amounted to R756 million in 2015, an increase of 133% compared to the previous year. We will expend more energy on attracting new women entrants into the enterprise sector going forward.

The challenge of stimulating the emergence of youth-empowered enterprises has been greater, despite available support programmes and associated marketing campaigns by the IDC, sefa and the National Youth Development Agency. This will be a focus area in the year ahead.

Value chain development will be at the centre of our new approach,

aiming to leverage economic linkages and enhance competitiveness. We are determined to lead industrial capacity development and improve the long-term sustainability of the country’s

industrial sectors.

Since its establishment in 2012, our subsidiary, sefa, has had

a noteworthy impact on the micro, survivalist, small and

medium enterprise sector. During the reporting period, around

R1 billion was approved for 1 262 SMEs (excluding cooperatives

and micro-enterprises), while disbursements increased to

R1.3 billion. sefa is still establishing the required footprint across

our country and implementing processes that will ensure an

effective and efficiently run operation. Going forward, sefa’s

direct reporting line with respect to the shareholder will be the

Department of Small Business Development, but the entity will

remain a subsidiary of the IDC.

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Ensuring financial sustainability

The Board continues to focus on safeguarding while leveraging

the IDC’s robust balance sheet to ensure that the Corporation

remains financially sustainable while fulfilling its developmental

mandate.

Our business partners, including subsidiaries and listed

investments, continued to experience a challenging operating

environment. Adverse developments in commodity markets,

including plummeting prices, affected company earnings,

profitability and dividend payments, as well as the share price

of listed investments.

On the production side, load-shedding and the insufficient

supply of electricity, rising costs and industrial action in major

areas of economic activity such as platinum mining, metals and

engineering, had a significantly negative effect on business

operations and financial performance.

The impairment charge of R1 532 million for 2015 was lower than

in 2014 (R1 597 million). Total impairments still represent 16.7%

(2014: 18.2%) of the gross portfolio at cost. Given the persistence

of difficult trading conditions, managing impairments is key to

our financial sustainability. We will, therefore, continue with

initiatives that contain impairments within acceptable levels.

During the reporting period, lower demand from the mining and

metals industries due to protracted industrial action affected

revenue from Scaw negatively. Scaw and the IDC have been

exploring and implementing options to secure the company’s

long-term sustainability.

The favourable impact of the Rand’s depreciation on selling

prices contributed to the modest increase in revenue from

Foskor. The company is implementing measures to address

operational challenges compounded by difficult market

conditions.

Adverse market developments also affected dividends received

from listed investments, notably Kumba Iron Ore Limited as a

result of depressed iron ore prices. Our reserves, in turn, have

been declining due to the reduced value of listed shares, such

as Sasol, BHP Billiton and Kumba Iron Ore, whose share prices

have been driven down by sharply lower commodity prices. The

Board continues to consider the appropriateness and optimal

balance of our equity portfolio.

Appreciation

On behalf of the Board of Directors, I thank Mr Geoffrey

Qhena, his executive team and the management and staff of

the IDC for their continued commitment to the fulfilment of

our developmental mandate, and for assisting the Board in

refocusing and reinvigorating the corporate strategy.

An aerial view of Reatile Gaz’s main production plant in Chamdor, Krugersdorp. IDC-funded Reatile Gaz is now one of the preferred suppliers of Liquefied Petroleum Gas (LPG). The business, co-founded by black industrialists, has grown significantly, acquiring other related enterprises to become a significant supplier of LPG in Southern Africa.

15


Employees at Agni Steel observing the production process at the company’s plant in Port Elizabeth. Government’s infrastructure programme, including projects driven by state-owned companies, coupled with localisation initiatives is critical for the development of the local steel industry.

On behalf of the IDC, I pay tribute to Ms Monhla Hlahla for her

exemplary stewardship as Chairperson of the IDC Board until

she retired in February 2015 and express my profound gratitude

to the recently retired and resigned directors, Mr JA Copelyn, Ms

LL Dhlamini, Mr SK Mapetla and Mr LR Pitot, for their diligent

service.

I take enormous pleasure in welcoming Ms NP Mnxasana, Mr B

Molefe and Ms ND Orleyn to the Board. Their contributions have

already reinvigorated our discussions and will undoubtedly be

instrumental in taking the IDC to even greater heights.

I also express my deep appreciation to Minister Ebrahim Patel

for his support, guidance and regard for the IDC as a key agent

in the implementation of national economic policy.

Despite expecting a continuation of the subdued economic

environment in the near term, we will amplify our efforts and

coordinate our activities with other state entities to achieve

the long-term goals of the National Development Plan and

government’s economic strategy as set out in the New Growth

Path, Industrial Policy Action Plan and National Infrastructure

Plan. We will also continue to seek partners and opportunities

that will materialise in jobs-rich industrial activity, improved

competitiveness and a more inclusive economy with increased

participation by women, the youth, black entrepreneurs and

industrialists.

B. Mabuza

Chairperson

August 2015

16


Board of directors

987

654

321

17


1. BA MABUZA (51)Chairperson(Non-Executive Director)

BA (Mathematics and Computer Science) (Hunter College, City University of NY), MBA (Finance and Information Systems) (Leonard Stern School of Business, NYU)

Appointed to the Board on 25 November 2011 and appointed Chairperson on 29 January 2015

Directorships:- Findevco (Pty) Limited- Afgri Operations- Africa Business News (Pty) Ltd- Development Bank of Southern

Africa- Lehumo Women’s Investment

Holdings- Nehawu Investment Holdings

(Pty) Ltd

Committees:- Member of the Board Human

Capital and Nominations Committee from 29 January 2015

- Chairperson of the Board Risk and Sustainability Committee before 29 January 2015

- Member of the Governance and Ethics Committee before 29 January 2015

- Member of the Board Investment Committee before 29 January 2015

2. MG QHENA (49)Chief Executive Officer(Executive Director)

BCompt (Hons) (Unisa), CA (SA), SEP (Wits and Harvard), Advanced Tax Certificate (Unisa)

Appointed to the Board on 1 March 2005

Directorships:- Findevco (Pty) Limited- Acerinox SA

Chairperson:- Foskor (Pty) Limited

3. LI BETHLEHEM (47)(Non-Executive Director)

BA (Hons) (Industrial Sociology) (Wits), Master of Arts (Wits), Certificate in Economics and Public Finance (Unisa)

Appointed to the Board on 1 October 2008

Directorships:- Findevco (Pty) Limited- HCI ProCo2

- Sedibelo Platinum Mine Limited

- Holds 4 other directorships, details available on request from the Company Secretary

Committees:- Chairperson of the Board Risk

and Sustainability Committee from 29 January 2015

- Member of the Board Investment Committee

- Chairperson of the Board Investment Committee before 29 January 2015

- Member of the Board Risk and Sustainability Committee before 29 January 2015

4. JA COPELYN (64)(Non-Executive Director)

BA (Hons) (African Governments) (Wits), BProc (Unisa)CEO – Hosken Consolidated Investments Limited

Appointed to the Board on 25 November 2011

Retired on 29 January 2015

Directorships:- Gallagher Estate Holdings

Limited- Sactwu Mining Investments

(Pty) Ltd- Seardel Investment

Corporation Limited- Holds 109 other directorships,

details available on request from the Company Secretary

Committees:- Member of the Board Audit

Committee before 29 January 2015


5. BA DAMES (49)(Non-Executive Director)

BSc (Hons) (Western Cape), MBA (Samford University)CEO – African Rainbow Energy and Power


Directorships:- Findevco (Pty) Limited- Nedbank Limited - Nedbank Group Limited- SE4ALL Initiative (EXCO

member, United Nations & World Bank)

- Sol Plaatje University (Member EXCO Committee)

- McKinsey & Company (Senior Advisor)

Committees:- Chairperson of the Board

Human Capital and Nominations Committee from 29 January 2015

- Member of Board Human Capital and Nominations Committee before 29 January 2015

- Member of Board Risk and Sustainability Committee

6. LL DHLAMINI (41)(Non-Executive Director)

BSc (Computer Science) (UCT), BCom (Conversion) (UCT), Postgraduate Diploma in Accounting (UCT), CA (SA) CEO – SekelaXabiso (Pty) Limited


Resigned on 31 August 2014

Directorships:- Xabiso Consulting- Xabiso CA Inc- Old Mutual Investment Group

SA- Old Mutual Alternative

Solutions


Capital and Nominations Committee until 31 August 2014

- Member of the Board Audit Committee until 31 August 2014

- Member of the Governance and Ethics Committee until 31 August 2014

7. RM GODSELL (62)(Non-Executive Director)

BA (Sociology and Philosophy) (University of Natal), MA (Liberal Ethics) (University of Cape Town), Postgraduate studies (Sociology and Philosophy) (Leiden University)


Directorships:- Findevco (Pty) Limited- Platmin Limited (resigned

during April 2015)

Chairperson:- Polymetal International PLC- Business Leadership SA


Capital and Nominations Committee

- Member of the Board Audit Committee

8. MW HLAHLA (52)Former Chairperson (Non-Executive Director)

BA (Hons) (Economics) (Pomona College, California), Masters in Urban and Regional Planning (University of California, Los Angeles)

Appointed to the Board on 1 October 2005 and appointed Chairperson on 25 November 2011


Directorships:- Liberty Holdings Limited- Ministerial Advisory Committee

on SME

Chairperson:- Royal Bafokeng Holdings


Capital and Nominations Committee before 29 January 2015

9. SM MAGWENTSHU-RENSBURG (55)(Non-Executive Director)

BA (Management Accounting and Business Administration) (Webster University, Vienna), MBA (Webster University, London), DPhil (Business Management) (UJ)


Directorships:- Findevco (Pty) Limited- The Small Enterprise

Foundation- Ministerial Advisory Committee

on SME

Chairperson:- Small Enterprise Finance

Agency SOC Limited


Investment Committee- Member of the Board Audit

Committee- Member of the Governance

and Ethics Committee before 29 January 2015


18


Board of directors (continued)

181716

151413

121110

19


10. SK MAPETLA (64)(Non-Executive Director)

BSc Chemistry (Lesotho), MSc Analytical Chemistry (USA), Business Management Diploma (Irish Management Institute Dublin), EDP (Wits), Certificate Programme in Financial Analysis (Wits)



Directorships:- Biotech Labs (Pty) Limited

Chairperson:- Afrika Biopharma Inv. (Pty) Ltd


Human Capital and Nominations Committee before 29 January 2015


11. NP MNXASANA (58) (Non-Executive Director)

CA (SA), BCompt (Hons) (Unisa)

Appointed to the Board on 29 January 2015

Directorships:- Findevco (Pty) Limited- Land Bank SOC Limited- Nedbank Limited- JSE Limited- ArcelorMittal South Africa

Limited- Holds 15 other directorships,

details available on request from the Company Secretary

Committees:- Chairperson of the Board Audit

Committee from 29 January 2015

- Member of the Board Risk and Sustainability Committee from 29 January 2015

12. B MOLEFE (48)(Non-Executive Director)

BCom (Unisa), MBL (Unisa), Post Graduate Diploma in Economics (University of London), Advanced Management Programme (Harvard Business School), Programme for Young Global Leaders (Kennedy School of Government, Harvard University), Executive Programme (Wharton Business School)

Interim CEO – Eskom Holdings SOC Limited (on secondment from Transnet SOC Limited)


Directorships:- Findevco (Pty) Limited- Lion of Africa Fund Managers

(Pty) Limited- Karibu Holdings (Pty) Limited- Karibu Capital (Pty) Limited- Karibu Real Estate Investments

(Pty) Limited

Committees:- Member of the Board

Investment Committee from 29 January 2015

- Member of the Board Audit Committee from 29 January 2015

13. PM MTHETHWA (51)(Non- Executive Director)

BA (Economics) (University of the North), MSc (Economics) (University of Paris), MBA (Corporate Finance) (University of Sheffield)CEO – National Empowerment Fund


Directorships:- Findevco (Pty) Limited- Mervana (10 Beneficiary Family

Trust)- Sanlam Limited- Sanlam Life Insurance Limited

Chairperson:- Group Five Limited

Committees:- Chairperson of the Governance

and Ethics Committee from 29 January 2015

- Member of the Board Investment Committee

- Member of the Board Risk and Sustainability Committee from 29 January 2015

14. ND ORLEYN (59) (Non-Executive Director)

BProc, Bluris, LLB, Certificate in Energy Law, Executive Management Programme (Kellogg Business School)


Directorships:- Findevco (Pty) Limited- Toyota SA (Pty) Limited- Toyota SA Financial Services

Limited

- Impala Platinum Holdings Limited

- Reunert Limited- Ceramic Industries Limited

Chairperson:- BP Southern Africa Limited


Investment Committee from 29 January 2015

- Member of the Board Human Capital and Nominations Committee from 29 January 2015

- Member of the Governance and Ethics Committee from 29 January 2015

15. LR PITOT (68) (Non-Executive Director)

CA (SA)



Directorships:- Findevco (Pty) Limited

Committees:- Chairperson of the Board Audit

Committee before 29 January 2015

- Chairperson of the Governance and Ethics Committee before 29 January 2015



16. ZJ VAVI (52)(Non-Executive Director)

Former General Secretary – COSATU


Directorships:- Findevco (Pty) Limited- Kopano Ke Matla Investment

Company (Pty) Limited


Capital and Nominations Committee

- Member of the Governance and Ethics Committee

- Member of the Board Risk and Sustainability Committee

17. NE ZALK (46)(Non-Executive Director)

BA (English and Private Law) (UNISA), Postgraduate Diploma in Economics (Development) (School of Oriental and African Studies), MSc (Economics) (with merit) (School of Oriental and African Studies, London University)


Directorships:- Findevco (Pty) Limited


Investment Committee- Member of the Governance

and Ethics Committee

18. GS GOUWS (56)Chief Financial Officer(Alternate Director)

BCom (Law), BCom (Hons) (UJ), CA (SA), FCMA, Advanced Management Programme (Insead)

Appointed to the Board on 1 February 1999

Directorships:- Findevco (Pty) Limited- Kumba Iron Ore Limited

(resigned on 8 May 2015)- Pebble Bed Modular Reactor

SOC Limited- Atlantis Business Park (Pty)

Limited- The Export-Import Finance

Corporation of South Africa (Pty) Limited

- Impofin (Pty) Limited- Konbel (Pty) Limited- Konoil (Pty) Limited- Kindoc Nominees (Pty) Limited- Findevco (Pty) Limited- Small Enterprise Finance

Agency SOC Limited- Herdmans South Africa (Pty)

Ltd

20


Leadership commentary:Chief Executive Officer

I am pleased, once again, to report a resilient performance by the IDC

in the face of a tough economic environment during the past financial year in which South Africa achieved a 1.5% real GDP growth. We continued to support the business sector with

approved transactions of R11.5 billion (2014: R13.8 billion).

During this period we saw an increase in investment in other sectors of

the economy, making up for lower approvals for renewable energy.

A combination of factors drove the economy’s weak

performance. These weighed negatively on consumer spending,

private sector production, investment plans and employment

creation. Limited fiscal space also hampered government

expenditure, while subdued demand in key external markets

impeded export growth.

South African consumers also experienced economic

challenges. High levels of household indebtedness, generally

stretched balance sheets and difficult labour market

conditions affected consumer confidence and spending

propensity. The worsening domestic economic environment,

infrastructure bottlenecks (particularly electricity supply,

transport and logistics services) and concerns about economic

growth globally, took a toll on private sector fixed investment.

Despite a robust increase in infrastructure spending by general

government, capital expenditure by public corporations

slowed substantially in 2014.

21


Building industrial development capacity

Funds were approved for 210 transactions (2014: 196), a

slight improvement, and while not satisfactory, we disbursed

R10.9 billion, which was only marginally less than the

R11.1 billion in 2014.

Despite declining confidence levels, the manufacturing sector

received 45% of the R11.5 billion approved funding, thus

countering the adverse trend in this critical sector of the economy.

The mining sector received 21% and infrastructure development

and services 34%. A small amount was approved for agriculture

and forestry sectors which will now have an increased focus in

the year ahead.

In the manufacturing sector, R594 million went to textiles and

clothing, with 2 240 jobs created and saved on the back of signs

of improvement in clothing manufacturing. The upward trend

in approvals included the R1.43 billion invested in the chemicals

industry during the past financial year.

Although the mining industry continued facing enormous

difficulties, particularly falling demand, plummeting prices

and rising input costs, our approvals in the sector amounted to

R2.5 billion, a significant increase from the R1.7 billion approved

in 2014.

The total value of approvals in green energy decreased to

R1.4 billion, of which R34.5 million was invested to projects

elsewhere in Africa. These included two Khana Energy wind

farm projects, Oyster Bay and Garob Wind, in which women, BEE

participants and the local community hold the majority shares.

In the healthcare sector, a notable beneficiary of IDC financing

was Good Manufacturing Practice, whose pilot plant forms

part of a project to commercialise locally developed, improved

technology for the manufacture of active pharmaceutical

ingredients for the treatment of tuberculosis.

High growth rates and booming economic conditions in the rest

of Africa, coupled with the limited supply of world-class hotels,

created the opportunity for the IDC to invest R360 million, of the

R553 million approved funding in the tourism industry, in projects

outside South Africa.

Fulfilling our socio-economic mandate

In our investment activities, we seek to maximise job creation

opportunities so as to contribute to reducing South Africa’s high

unemployment rate. Our approvals in the year under review are

expected to facilitate the creation and saving of 14 537 and

5 851 jobs, respectively. Of the total number of jobs expected to

be created, 54% will be in the manufacturing sector.

Regional equity through the development of production

capacity in less industrialised provinces remains a key strategic

focus, especially in rural areas.

Our total approvals for operations located in rural areas of South Africa amounted to R4.3 billion (37% of the total), with 8 223 jobs expected to be

created or saved. Most of the rural investment activities are in sectors prioritised by government, such as minerals beneficiation, high-value agriculture and agro-processing.

The IDC supports the principle of Black Economic Empowerment.

I am pleased to report that we approved 85 transactions to the

value of R5.9 billion for black-empowered companies with black

individual shareholding of more than 25%, representing 51%

of the overall approval value. Among the beneficiaries were

41 black industrialists who received approximately R2 billion

in funding and whose operations are expected to facilitate the

creation of 2 970 new jobs.

We also invested R756 million (2014: R325 million) in women-

empowered (more than 25% shareholding) businesses in

sectors such as mining, chemicals manufacturing, renewable

energy generation and wind power. This increase over previous

years is encouraging and we hope a harbinger for significant

growth in this area.

Supporting youth-empowered businesses is a valuable

investment for the future economic growth of our country.

While the level of uptake from this sector was unsatisfactory, we

approved R159 million in funding for 11 companies with youth

shareholding of more than 25%. In addition to the funding,

we provided young business owners with skills sets through

interventions such as our Graduate Internship Programmes and

a Chartered Accountant Learnership. Overall, 116 young people

have benefited from our internship programmes.

As the IDC, we embrace the philosophy of giving back to the

community through corporate social investment (CSI) initiatives

aligned with education, specifically in rural areas.

22


Thus far, we have invested R21 million in the 20 secondary

schools adopted in 2013, provided educators with opportunities to increase their competence and learners with career guidance

sessions at universities, empowered youth with green skills training and

distributed sanitary towels to girl learners.

CSI initiatives were extended through support programmes for

under-prepared university students and Technical Vocational

Education and Training (TVET) colleges. During the past year,

503 employees voluntarily participated in five initiatives in

which we partnered with 29 organisations to the benefit of

communities.

We continued to support development agencies through our

Municipal Agency Programme to improve social and economic

development and leverage development and job creation

potential in marginalised communities. Our investments

resulted in R18 million being approved for six development

agencies to move beyond the establishment to the operational

phase. These agencies are mainly located in rural areas and play

a critical role in facilitating projects that support local economic

development in specific municipalities. We also funded 17

special/spatial interventions with commitments of R60 million

and leveraged R40 million through co-funding with other

organisations.

The IDC is committed to conducting business in an ethical,

socially responsible and environmentally sustainable manner.

We use an Environmental and Social (E&S) Framework to

screen investments for risks such as human rights, social and

community issues, retrenchment practices and land use, energy,

water and air pollution. We also assess existing clients annually

to reinforce E&S compliance with corrective measures and have

made good progress in monitoring water usage and achieving

our water management goals.

Sustaining financial strength to advance our mandate

In 2015 we advanced R10.9 billion in new loans and investments,

a slight decline from the R11.1 billion recorded in 2014. This

resulted in total loans and advances growing to R22.4 billion

and investments to R28.2 billion (2014: R20.8 billion and R28.1 billion respectively).

The revaluation of investments to fair value, from R64.2 billion to R44.9 billion, was mainly due to the decrease in the value of listed equities as a result of lower commodity prices, particularly iron ore. The IDC’s base portfolio of mature, listed shares is vital to ensure a steady income stream and a basis for raising loan funds. We are therefore considering how we can ensure that the Corporation is protected from such shocks in the years ahead.

Conversely, the value of IDC’s unlisted investments increased during the year. This development, coupled with the profits generated by equity accounted investments, is indicative of positive growth in our new investments.

The revenue derived during the year decreased by 2% to R19.6 billion. Revenue of R6.3 billion from our subsidiary company Scaw was slightly lower than in 2014 (R6.5 billion) due to continued difficulties in the steel industry. Foskor’s revenue, in turn, was up by 4% compared to the previous year (R5.3 billion) due to, among other factors, the effect of a favourable exchange rate. Initiatives are underway to address operational and market challenges faced by Scaw and Foskor.

Interest income of R2.2 billion was 2% higher than in 2014 as a result of the increase in the loans and advances book during the year. The decline in dividends received of 17% below the previous year was due to lower dividends received from certain listed equities.

Operating profit for the year declined from R2.5 billion in 2014 to R1.0 billion in 2015. This was attributable to higher financing cost as a result of increased borrowings, and a decrease in dividends received.

Although the level of impairments decreased from R1.6 billion to R1.5 billion, these remain high, reflecting the difficult trading conditions persisting in the South African economy.

The IDC’s borrowings portfolio continues to grow through traditional sources of funding such as other development finance institutions and the issuance of public bonds. Borrowings for the year grew to R24 billion (2014: R21.4 billion).

Total assets declined to R122.3 billion (2014: R138.6 billion) during the past year as a result of the fair value decrease of certain listed equities as highlighted earlier. Higher debt levels, coupled with the lower reserves, resulted in a higher debt/equity ratio of 27% (2014: 20%), which is still well within our risk tolerance levels and provides us with the opportunity, therefore, to continue leveraging the business in support of our developmental mandate.

23


Our people, our valuable assets

Retaining high calibre staff remained a priority to deliver on

our mandate. Most of our employees (approximately 76%) are

professionally qualified specialists in executive, management

and professional roles. During the year under review, our staff

complement of 825 remained fairly static compared to the

previous financial year, with a slight reduction of 0.4% in the

number of employees. We are, however, concerned about the

increase in staff turnover to 10.7% (2014: 7.1%).

Our staff composition is aligned with achieving the IDC’s

employment equity targets to fairly represent the demographic

profile of South Africa and include people from other countries.

During the past year, foreign nationals represented 4% of our staff

complement.

Future prospects

As we commemorate our 75th anniversary in the year ahead, I

believe we are well-positioned to implement our revised strategic

focus for greater impact in future years, specifically through the

development of value chains, both upstream and downstream.

As outlined in the Chairman’s statement, our proactive approach

will take effect in the 2015/16 financial year and should lead to

higher levels of economic activity and job creation.

We have constituted working streams and an interim office to

ensure a smooth transition and corporate-wide implementation

of our new approach. We also reviewed our operational structure

and identified organisational skills required for successful future

operations.

We remain steadfast in our commitment to improving the

quality of our service delivery to customers and embed a

customer-centric culture through our Service Charter and other

initiatives.

The IDC’s balance sheet remains strong, notwithstanding the

decline in total assets caused by a lower market valuation of

listed investments. We are confident that by leveraging private

sector investments the IDC will be in a position to advance

the funds set aside for the growth of black industrialists in the

productive sectors, as well as support for women-owned and

youth-empowered businesses.

Acknowledgement

I would like to extend my special thanks to the management

and employees of the IDC for their dedication and tireless efforts

in ensuring that the Corporation fulfils its mandate.

My sincere gratitude goes to the retired Board Chairperson,

Ms Monhla Hlahla, and Board members Mr John Copelyn,

Ms Lindani Dhlamini, Mr Shadrack Mapetla and Mr Roger Pitot

for their quality leadership and enormous contribution over

the years. I am also thankful to the current members of the

Board under the Chairmanship of Ms Busisiwe Mabuza for their

ongoing guidance and leadership.

We are always grateful to our shareholder, the Honourable

Minister Ebrahim Patel, for his strategic guidance in ensuring

that the IDC achieves its developmental mandate. I would

also like to thank the honourable members of the Portfolio

Committee on Economic Development under the leadership of

Ms Mathulare Elsie Coleman for their continuous support and

interest in the business of the Corporation.

MG Qhena


August 2015

24


24

Executive management

6 7

8 9 10

5

42 3

1

25


25

1. MG QHENA (49)Chief Executive Officer

BCompt (Hons) (Unisa), CA (SA), SEP (Wits and Harvard), Advanced Tax Certificate (Unisa)

2. RJ GAVENI (43)Divisional Executive: Human Capital

B Admin (Hons) (Industrial Psychology) (Unisa), Masters in HR Management (Golden Gate University, USA), Executive Development Programme (GIBS)

3. GS GOUWS (56)Chief Financial Officer / Divisional Executive: Transaction Support and Post Investment

BCom (Law), BCom (Hons)(UJ), CA (SA), FCMA, Advanced Management Programme (Insead)

4. DA JARVIS (45)Divisional Executive: Corporate Strategy

B Soc Sci (UND), B Soc Sci (Hons) (UND), M Soc Sci (UND)Appointed to executive management on 1 April 2015

5. MP MAINGANYA (42)Chief Risk Officer

BCom (Wits), BAcc (Wits), HDip Tax Law (RAU), Adv. Cert. Banking (UJ), IEDP (Wits), GEDP (GIBS), CA (SA)Appointed on 1 September 2014

6. P MAKWANE (49)General Counsel and Group Company Secretary

BIuris, LLB (Western Cape)

7. AP MALINGA (50)Divisional Executive: Mining and Metals Industries

Mining and Manufacturing IndustriesBSc (Geology) (UCT), MBL (Unisa)

8. SAU MEER (53)Divisional Executive: Chemicals and Textiles Industries / Divisional Executive: Corporate Affairs (acting)

BSc (Mechanical Engineering) (University of Natal), MBL (Unisa), Advanced Management Programme (Insead), Executive Development Programme (GIBS)

9. KC MOROLO (51)Divisional Executive: Agro, Infrastructure and New Industries

BSc Eng (Mechanical Engineering) (Wits), M Eng (Engineering Management) (University of Pretoria), Board Leadership Programme (GIBS)

10. K SCHUMANN (46)Divisional Executive: High Impact and Regions

B Home Economics, MBA (Stellenbosch), Advanced Management Programme (Insead)

26


Assurance statement

To the Directors of Industrial Development Corporation of South Africa

We have undertaken a limited assurance engagement on selected sustainability information, as described below, and presented in the 2015 Integrated Report of the Industrial Development Corporation of South Africa Limited (IDC) for the year ended 31 March 2015 (the Report), as well as on the supplementary online information in Section 5, available on the IDC website, at [email protected] (the supplementary online information). This engagement was conducted by a

multidisciplinary team of health, safety, environmental and assurance specialists with extensive experience in sustainability reporting.

Subject matter We are required to provide limited assurance on the following key performance indicators, prepared in accordance with the Global Reporting Initiative (GRI) G4 Guidelines. These indicators have been marked with an ‘LA’ on the relevant pages in the Report and the supplementary online information.

Independent Assurance Report on Selected Sustainability Information

Performance area

Key Performance Indicators Unit of

MeasurementReference Page number Boundary

Economic EC1: Direct economic value generated Rand-value 88 of the Report IDC (head office) EC8: Significant indirect economic impacts, including extent of

impacts Text claim 99 of the Report, 29 and 31

of the supplementary online information

EC9: Proportion of spending on local suppliers at significant locations of operations

Percentage 19 of the supplementary online information

Environmental EN3: Energy consumption within the organisation Number 54 of the Report IDC (head office) EN5: Energy intensity ratio of the organisation Number 54 of the Report

EN15 and EN16: Total direct and indirect green house gas emissions by weight (encompassing only scope 1 and 2 emissions and excluding scope 3 emissions)

Number 54 of the Report

Social: Labour Practices and Decent Work

LA1: Total number and rates of new employees hired and employee turnover by age group, gender and region

Number 62 of the Report IDC (head office)

LA5: Percentage of total workforce represented in formal joint management–worker Health and Safety committees that help monitor and advise on occupational health and safety programmess

Percentage 64 of the Report

LA9: Average hours of training per year per employee by gender, and by employee category


LA10: Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing careers

Text claim 64 of the Report

LA11: Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

Percentage 63 of the Report IDC (head office)

LA12: Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

Number 59-61 of the Report, 74 of the Report 3-4 of the supplementary online information6-8 of the supplementary online information

LA16: Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms


Social: Human Rights

HR3: Total number of incidents of discrimination and corrective actions taken

Number 64 of the Report IDC (head office)

Social: Society SO3: Total number and percentage of operations assessed for risks related to corruption and the significant risks identified

Number & Text claim

16-17 of the supplementary online information

IDC (head office)

SO4: Communication and training on anti-corruption policies and procedures

Number & Text claim

16-17 of the supplementary online information

SO8: Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

Rand-value 78 of the Report

27


Directors’ responsibilities The Directors are responsible for the selection, preparation and presentation of the sustainability information in accordance with the GRI G4 Guidelines. This responsibility includes the identification of stakeholders and stakeholder requirements, material issues, for commitments with respect to sustainability performance and for the design, implementation and maintenance of internal controls relevant to the preparation of the Report and supplementary online information that is free from material misstatement, whether due to fraud or error.

Our independence and quality control We have complied with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which includes independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

In accordance with International Standard on Quality Control 1, KPMG Services Proprietary Limited and SizweNtsalubaGobodo Incorporated maintain comprehensive systems of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Our responsibilityOur responsibility is to express a limited assurance conclusion on the selected sustainability information based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform our engagement to obtain limited assurance about whether the selected sustainability information is free from material misstatement.

A limited assurance engagement undertaken in accordance with ISAE 3000 involves assessing the suitability in the circumstances of IDC’s use of GRI G4 Guidelines as the basis of preparation for the selected sustainability information, assessing the risks of material misstatement of the selected sustainability information whether due to fraud or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of the selected sustainability information. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks.

The procedures we performed were based on our professional judgement and included enquiries, observation of processes performed, inspection of documents, analytical procedures, evaluating the appropriateness of quantification methods and reporting policies, and agreeing or reconciling with underlying records.

Given the circumstances of the engagement, in performing the procedures listed above we: • Interviewed management and senior executives to obtain

an understanding of the internal control environment, risk assessment process and information systems relevant to the sustainability reporting process;

• Evaluated internal data management controls based on system walkthroughs.

• Inspected selected internally and externally generated documents and records and comprehensive data analyses.

• Re-calculation of the key performance indicators. • Evaluated whether the selected sustainability information

presented in the Report and supplementary online information is consistent with our overall knowledge and experience of sustainability management and performance at IDC.

The procedures performed in a limited assurance engagement vary in nature from, and are less in extent than for, a reasonable assurance engagement. As a result the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether IDC’s selected sustainability information has been prepared, in all material respects, in accordance with GRI G4 Guidelines.

Limited assurance conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that the selected sustainability information identified in the table above for the year ended 31 March 2015 is not prepared, in all material respects, in accordance with GRI G4 Guidelines.

Other matters Our report does not extend to any disclosures or assertions relating to future performance plans and/or strategies disclosed in the Report or supplementary online information.

IDC intends to publish the Integrated Report for 31 March 2015 financial year end, consisting of a printed report, as well as additional online disclosures available on the IDC website, at [email protected]. The maintenance and integrity of IDC’s website is the responsibility of IDC management. Our procedures did not involve consideration of these matters and, accordingly we accept no responsibility for any changes to either the information in the Report or supplementary online information, or our independent assurance report, that may have occurred since the initial date of presentation on the IDC website.

Restriction of liability Our work has been undertaken to enable us to express the conclusions on the selected sustainability information to the Directors of IDC in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than IDC, for our work, for this report, or for the conclusion we have reached.

KPMG Services (Pty) Limited Registered Auditor

Per N Morris Chartered Accountant (SA) Registered Auditor Director 30 June 2015

KPMG Crescent 85 Empire Road Parktown Johannesburg, 2193

SizweNtsalubaGobodo Inc. Registered Auditor

Per D Manana Chartered Accountant (SA) Registered Auditor Director 30 June 2015

SizweNtsalubaGobodo Building 20 Morris Street East Woodmead Johannesburg, 2191

28


SECTIO

N 2

Material mattersImpacting on industrial development




Ensuring financial sustainability

2942567379

29

Material matters

Impacting on industrial development

R483 MILLIONapproved for chemicals,

pharmaceuticals and non-metallic minerals

R2.0 BILLIONapproved for 41 black

industrialists

R14 BILLIONtotal investment in

REIPPPP over 5 years

R594 MILLIONapproved for clothing,

textiles and footwear sectors

R2.5 BILLIONapproved for projects

in mining

R197 MILLIONfunding for films and

broadcasting

R5.9 BILLIONapprovals for business with

black ownership of more than 25%


30


In 2014, largely as a result of global conditions, South Africa

experienced economic challenges, with weak GDP growth (1.5%)

and a 3.4% contraction in real private sector fixed investment.

The reduction in investment levels was evident across all sectors

of the economy apart from mining and the community, social

and personal services sector.

IDC maintained a high level of funding approvals. These

amounted to R11.5 billion in 2015 compared to R13.8 billion

in the previous year. The decrease can be attributed to only

R348 million approved for renewable energy projects during

the reporting period compared to the R6.6 billion approved for

Round 3 projects in 2014.

The number of approved transactions increased slightly to

210 (2014: 196), while disbursements for the year declined

marginally to R10.9 billion compared to the previous year

(2014: R11.1 billion).

The R11.5 billion approved funding went to the manufacturing

(45%), mining (21%) and infrastructure development and

services (34%) sectors. A small portion was approved for

agriculture and forestry sectors requiring increased focus in the

year ahead.

2011

R’bi

llion

16

6

2

4

02012 20142013 2015

8.7

13.5

8

10

12

Value of financing disbursed per year: 2011 to 2015

2011

R’bi

llion

18

10

6

8

02012 20142013 2015

12

14

16

4

2

6.3

8.4

16.0

11.1

10.9

Our objective to increase and diversify industrial capacity is

achieved primarily by providing businesses with funding to create

new production capacity or upgrade and expand their existing capacity.

14

13.1

13.8

11.5

REIPPPP approvals

Other approvals

Value of financing approvals per year: 2011 to 2015

21%

45%

34%

Mining

Manufacturing

Infrastructure and services

Food processing R86m

Textiles, clothing & footwear R594m

Wood and wooden products R1 283m

Chemicals, plastic and rubber production R305m

Pharmaceuticals R53m

Non-m

etallic mineral production R124m

Basic iron and steel R1 362m

Met

als a

nd m

etal

pro

duct

ion

R203

m

Mac

hine

ry R

252m

Elect

rical

and el

ectro

nic eq

uipm

ent R

374m

Automotive products a

nd components R453mOther R30m

Recycling R31m

Funding approvals within the manufacturing sector: 2015

31

Material matters

Funding approval share per broad economic sector: 2015

Manufacturing

The deteriorating economic climate during 2014 resulted in low

levels of business confidence, particularly among manufacturers.

Nationally, private sector fixed investment in the manufacturing

industry declined by 0.5% in real terms during the 2014 calendar

year. Since the manufacturing industry is core to our mandate,

the sector attracted the largest portion (45%) of IDC funding for

the year.


Mining

Manufacturing

R2 473m (21%)

R3 8

53m

(34%

)

R5 151m (45%

)

32


The bulk, R2.6 billion, of the approvals within the manufacturing sector went to the basic and downstream metal industries. We also approved an additional R102 million from the Department of Trade and Industry’s (the dti) Manufacturing Competitiveness Enhancement Programme (MCEP). Historically, our role in developing the manufacturing industry has been significant and we are formulating strategies currently for the future development of the broader value chain for both the upstream and downstream segments.

Government’s infrastructure programme, including projects driven by state-owned companies such as Eskom, Transnet and PRASA, coupled with localisation initiatives and products designated for public sector procurement, is crucial for the development of this industry.

This was a consideration during our purchase of a controlling stake in Scaw in 2013. The prolonged labour unrest in the mining sector, as a key user of manufactured products and subsequent strike in the metals industry, however, have been particularly challenging for the metals industry. As a result, we provided Scaw with additional funding during the year. IDC is considering strategic equity partners that will bring operational experience, technology enhancements, global market reach and presents that will contribute to developing Scaw’s business further, driving value enhancements for all stakeholders.

During the year, the development of a large steel project to provide competitively priced steel to downstream steel

processors moved ahead with the signing of a Memorandum of Understanding (MoU) between ourselves, the China Africa Development Fund (CADFund) and Hebei Iron and Steel, a Chinese strategic equity partner. A detailed feasibility study is currently underway.

We also supported the local manufacturing of rolling stock with a R220 million funding package for the DCD Group to manufacture 240 locomotive bodies for Transnet. The MoU we signed with Alstom to cooperate in local supplier development and the R120 million funding provided to Tubular Construction Projects to manufacture and supply air-cooled condenser systems to Eskom’s Kusile power station, currently under construction, are further examples of how our strategic partnerships in the industry are helping to increase localisation.

A large, 75-year-old foundry in the East Rand, with significant shareholding by a black industrialist, received R174 million in funding to become more competitive. The company manufactures spheroidal graphite and grey iron castings and is using the funds to replace and upgrade equipment and install backup electrical supply infrastructure to curb the effects of power outages and ensure that furnaces are shut down properly.

We also commissioned a new technology plant to produce low-cost scrap substitute from waste dumps to reduce the costs of steel for the producers who use electric arc furnace technology.The automotive industry, which contributes approximately 6% of manufacturing value-addition to the economy and employs

The bulk of the R2.6 billion approved within the manufacturing sector went to the basic and downstream metal industries. Above, an employee at Southern Cross–a beneficiary of IDC support–inspects a finished product.

33

Material matters

8% of workers in the manufacturing sector, is an important strategic industry for the IDC. The Automotive Production Development Programme (APDP) – a government- sponsored incentive programme that, with its predecessor (the Motor Industry Development Programme), has been crucial for the industry’s growth and development resulting in increased investment in the industry.

Motherson Sumi Systems Limited (MSSL), a foreign component manufacturer that established production facilities locally, is an Indian tier 1 supplier of a wide range of automotive components. We provided the company with R85 million as a second round of funding to expand their Durban plant to manufacture components for the Toyota Hilux. The expansion will create new employment opportunities for 400 people.

R200 million was approved in 2015 for an existing independent paper producer to upgrade technology and improve efficiency to remain sustainable. Other funding beneficiaries in the wood and paper industry included funding the export of South African-made forestry equipment to Rwanda.

The textiles, clothing, footwear and leather sub-sectors are all showing varying signs of improvement. The increase in the local manufacture of clothing is being driven by demand for fast fashion, as well as macro-factors such as price pressures in the East and a weaker Rand/US Dollar exchange rate. Over the past three years, the local manufacture of footwear grew against a slow-down in imports. In total, funding of R594 million was

approved in this industry in 2015, of which R67.6 million was to support seven black industrialists. This included additional funding for Chic Shoes, a black woman-managed business.

Our funding for Good Hope Textiles (Da Gama), a company that faced financial challenges, saved close to 600 jobs in the rural area of Zwelitsha, Eastern Cape. Da Gama is a large manufacturer of work wear fabric and high quality shweshwe fabric.

A substantial portion of funding approvals for the clothing and textiles sector in 2015 came from our Clothing, Textiles, Footwear and Leather competitiveness (CTFL) funding scheme. We also manage the Clothing and Textiles Competitiveness Programme (CTCP) on behalf of the dti, from which, during 2015, R618 million was disbursed to the beneficiaries of the Production Incentive Programme and R132 million to the Competitiveness Improvement Programme. These initiatives are aimed at increasing competitiveness in the industry.

An impact analysis of the CTFL scheme showed that, as a result of the CTCP, the manufacturing value-added (MVA) increase in the industry exceeded the value of CTCP disbursements by 50%. In addition, CTCP participants created employment for 6 900 workers from 2009 to 2014.

The diversified chemicals industry has some segments that are capital-intensive, while others are labour-intensive. During the reporting period, we approved funding of R483 million for companies in these industries. One of the largest single

Demand is driving increase in the local manufacture of clothing. Above, employees at Glodina – an IDC funded textiles client based in Hammarsdale, KwaZulu-Natal – add finishing touches to a product.

34


investments during the year was in a new technology in an industrial scale plant to produce solvents, waxes and oils from plastic waste materials. We also started with a feasibility study to investigate the viability of a production facility to reclaim chrome-3 waste from tannery operations with the potential to replace a portion of chrome-3 pigment imports.

In the pharmaceutical industry, we supported attempts to establish an Active Pharmaceutical Ingredient (API) industry. The initiative gained traction during 2015 when we approved funding for a start-up vaccine and biologics company to locally produce and commercialise a tuberculosis vaccine developed by the US-based Infectious Disease Research Institute (IDRI), a leading not-for-profit research and development (R&D) organisation that specialises in neglected infectious diseases.

During the past year, we also assisted a Black Economic Empowerment (BEE) consortium and management team to acquire a mid-size pharmaceutical manufacturer. In addition, we partnered with a local university to pioneer the formalisation of African traditional medicine.

Funding within the non-metallic mineral products industry declined compared to previous years. We approved additional funding for the Cimentos da Beira plant in Mozambique, which started production during the year, but contrary to 2014 and 2013, did not invest in new cement plants in the rest of the continent.

The agro-processing industry is important to the IDC because of its value chain that links into primary agriculture and its potential impact on rural development. The IDC/Agbiz confidence index, which indicates the levels of confidence in the agri-business sector, has been on an upward trend since the 2009 financial crisis. The index has flattened since 2012, indicating a decline in confidence in the sector due to depressed local consumer and major export markets, weak economic growth prospects and lacklustre fixed investments in an uncertain policy environment.

This resulted in less IDC funding within the agro-processing industry, with a net amount of R86 million approved during 2015. A sizeable investment of R203 million enabled an established, vertically integrated meat processing business to extend its value chain from the livestock farmer in rural areas to a retail product available to the end-consumer. We invested in horticulture and related processing, dairy processing, animal feed, food products, beverages and aquaculture.

Funding disbursed: Manufacturing

Other

R12m

Automotive products and components

R586m

Electrical and electronic equipment

R374mMachinery

R49mMetals and metal products

R89m

Basic iron and steel

R1 822m Non-metallic mineral products

R112m

Pharmaceuticals

R310m

Chemicals, plastic and rubber products

R567m

Wood and wooden products

R286m

Textiles, clothing & footwear

R485mFood processing

R58m

35

Case study Robertson & Caine

Project Phakisa has highlighted the importance and

contribution of boat building to South Africa’s “Oceans

Economy” in generating foreign income and creating jobs.

Critical to achieving project Phakisa’s objective is enhancing

growth of the labour-intensive boat building industry – which

is also an IPAP key focus sector.

Robertson & Caine (Pty) Ltd, a yacht manufacturer founded in

1991 by John Robertson and Jerry Caine, has used IDC funding

to expand and grow their company since 2008. On the back

of this partnership with the IDC, the company increased yacht

orders from 126 in 2014 to 188 in 2015. Orders for 2016 have

since risen to 200.

Currently, our funding support is aimed at improving the

company’s manufacturing facility in the Western Cape,

expanding its manufacturing plant into a new factory to be

based in Montague Gardens. IDC funding is aligned with our

strategic intent to assist the ship and boat building sector.

The planned expansion will create an estimated 222 new jobs.

After expansion, Robertson & Caine is expected to grow its staff

complement to 1 300.

21%

45%

34%

MiningManufacturing


Mining of coal and lignite R198m

Mining of gold and uranium ore R79m

Chrome mining R15m

Copper mining R200m

Manganese mining R1 862m

Other metal ore mining,

except gold and

uranium R119m

Other funding approved during the past year within the mining

sector included R200 million to extend the life of the Palabora

Copper Mine by a further 20 years and R198 million for black-

owned coal mines as important future sources of supply for

South Africa’s energy mix.

In the platinum sector, technology replacement improvements

at the Sedibelo Platinum Mine are progressing well. We

approved funding for this operation in 2012 and to date the

development of the Kell Technology to replace the conventional

energy-intensive platinum smelting process has progressed to

pilot plant stage, while a detailed feasibility study commenced.

We provided R100 million through sefa for an early-stage

mining fund to address the shortage of funding for early-stage

exploration projects. This is a high-risk area with very little

capital and the fund will assist with project development until

other financiers have the confidence to provide funding.

Funding disbursed: Mining

Platinum group metals

R317m

Chrome mining

R136m

Mining of diamonds

R146m

Mining of coal and lignite

R471m

Mining of gold and uranium ore

R262m

Mining

Globally, operating conditions in the mining industry remained

difficult amidst the steep decline in commodity prices, as well

as falling demand and rising input costs. In South Africa, these

challenges were compounded by a debilitating labour strike,

inadequate electricity supply and intermittent cuts.

In the aftermath of the five-month strike in the platinum mining

industry which ended in June 2014, the period of adjustment

before mining operations could return to full production

resulted in a substantial drag on the national mining output for

the year as a whole.

Our role in the mining industry is important, as we provide risk

capital for early stage projects, an area which most funding

institutions see as high-risk. During the reporting period, we

approved R2.5 billion for early stage mining industry projects.

The largest portion (R1.9 billion) of this funding was additional

funding for the Kalagadi Manganese project in the Northern

Cape.

Funding approvals to the mining sector: 2015

36

37

Material matters

21%

45%34

%

Mining

Manufacturing


Construction R29m

Production and distribution of

electricity, gas and water R1 987m

Tourism facilities R129m

Monetary intermediation R491m

Transporting & warehousing

R497m

Telecommunication R86m

Wholesale, retail & business service R115m

Waste recycling R137m

Hospital activities R209m

Media, motio

n picture & recreatio

nal activ

ities R

150m


South Africa’s energy landscape has changed drastically due

to the continued strain on the electricity grid, with special

dispensations announced by the Department of Energy (DoE).

The largest impact has been on the renewable energy segment,

one of the fastest-growing industries in the country and one

that has contributed significantly to its transformation.

Funding approvals to the infrastructure and service sectors:

2015

Our role in funding projects during the first three rounds of the

Renewable Energy Independent Power Producer Procurement

Program (REIPPPP) has contributed significantly to mitigating

risk in the sector. In 2015, our role declined as other funders

stepped forward to provide development funding for the

industry. This was evident in our reduced participation in Round

4 of the programme. In total, our investment in the industry

sector grew to approximately R14 billion.

Several of the projects supported early in the REIPPPP have

started delivering electricity to the grid, which assist with

easing current supply constraints. In November 2014, severe

weather conditions caused the collapse of a crane at Khi Solar

One in Upington, one of our largest investments in the industry.

Regrettably this resulted in the death of two employees.

The IDC put in a successful bid for 14 projects in the Small

Independent Power Producer Programme (SMALLS) with

14 projects. The programme is aimed at small projects with

a generation capacity of between 1 megawatt (MW) and

5 MW. Our involvement in SMALLS also stimulates localisation

opportunities through the enforced use of locally manufactured

photovoltaic (PV) components.

Some of the funding approved during the past financial year

helped to unlock an estimated 10 MW in Biomass, 100 kilowatt

(kW) in fuel cells and 70 megawatt hour (MWh) per month in

energy recovery from the country’s exhaust waste stream. The

installation of the country’s first commercial fuel cell energy

generation was one of the ground-breaking projects approved

for funding in 2014. Undertaken at the Chamber of Mines’

Johannesburg offices, the project importantly demonstrates

the viability of using fuel cells as a power source, which can

stimulate the creation of a new industry around South Africa’s

platinum resources as a key component of fuel cells.

Other funded alternative energy infrastructure projects included

the Sunrise Energy project (R490 million), a liquefied petroleum

38


gas (LPG) terminal and storage facility in Saldanha and Egoli Gas,

to extend its gas pipeline. An important milestone in the Sunrise

Energy project was the shareholding acquired by Mining, Oil

and Gas Services (MOGS), a black-owned resources company.

Elsewhere on the continent, we approved funding for a 330 MW

coal-fired power plant near Maamba in Zambia. This plant will

assist in mitigating energy constraints in the region.

South Africa has made good progress in the information

and communication technology (ICT) arena, but still faces a

number of key challenges. These include a shortage of skilled

resources and a lack of competition, despite strong growth in

the telecommunications sector. We are funding projects to

accelerate access to ICT infrastructure, including establishing

wireless and broadband infrastructure in Soweto.

The South African motion pictures industry has seen significant

progress during the past two decades, yet in television and

feature films it remains underdeveloped. During the past

financial year, we approved funding of R150 million for

companies in the media, motion pictures and related industries.

We continued to support production infrastructure with funding

for Cape Town Film Studios to construct a new, flexible, double

stage that can be divided into two parts for television use and

feature film production.

We also launched the Emerging Black Filmmakers Transformation

Fund at the Durban International Film Festival in July 2014. The

Fund is a partnership between the IDC, the dti and the National

Film and Video Foundation to develop black producers and

directors.

In addition, radio broadcasting is being taken to a new level

with funding of R46.1 million to establish a new commercial

radio station for the black middle class in seven of South Africa’s

provinces. The funding supports the establishment of black

industrialists in the commercial radio broadcasting sector.

Media, motion pictures & recreational activities

R41mFunding disbursed: Infrastructure and services

Hospital activities

R104mTelecommunications

R46m Tourism facilitiesR48m

Wholesale, retail & business services

R228mConstruction

R109m

Production of electricity, gas & steam

R2 204m

39

Material matters

Selected IDC projects and investments of more than R50 million are reflected

A

B

C

F

H

I

K

M

N

E R

T

U

W

Z

Agriculture and agro-processing

Automotive

Chemicals and plastics

Food processing

Healthcare

LPG Storage terminal

Machinery

L Metal products

Mining

Non-metallic mineral products

Ethanol Renewable energy: wind and solar

Textiles

Tourism

Wood and paper

Motion picture productionJ ICT

A

A

A

A

A

A

A A

A

A

B

B

AB

B

C

C

C

FN

R

F

F

L

M

L

H

H

HM

K

K

K

L

L

L

M

M

M

MM

M

L

E

R

R

R

R

R

N

T U

O

WU

W

H

WH

R

R

U

UW

R

R

TZ

Caledon

Prince Alfred Hamlet

PaarlCape Town

Saldanha

De Aar

Prieska

DouglasKenhardt

KakamasPofadder

Upington

Kuruman

Hotazel

Postmasburg

Rouxville

Uitenhage

Oyster Bay

Port ElizabethCoega

StutterheimGrahamstown East London

Cradock

Komga

Molteno

ProspectonWezaDurban

PietermaritzburgVerulam

Richards BayWinterton

Reitz

Germiston

MiddelburgMbombela

Johannesburg

Brits

LedigGa-Rankuma

Sabie

Phalaborwa

TzaneenPolokwane

Lephalale

R

R Kathu

MKlerksdorp

RRustenburg

MThabazimbi

M Kroonstad

KJ

A L

AGeorge

R Swartland

H

Truly African, not South African only

Over the past years, our approach to funding projects in

the rest of Africa has changed. In 2012, we adopted an

approach to fund projects of mutual benefit to South Africa

and the host country. Recently IDC’s investments into Africa

reached nearly R4 billion cumulatively (2015: R1.8 billion and

2014: R2.0 billion) to companies promoting services and

products from South Africa. These African development finance

institutions also received R490.8 million to lend to businesses in

African countries to stimulate development in those economies,

which, ultimately, will benefit the South African economy.

Funding approved for the tourism and hospitality industry in

Africa, in order to alleviate accommodation constrains and

expedite the completion of previously approved projects,

amounted to R160.5 million in 2015. In addition, the production

and distribution of electricity in the region was boosted with

funding of R535 million to mitigate energy supply constraints,

which is a common challenge on the continent.

Refer to next page for graph on IDC’s investments in the rest of

Africa (2011 to 2015).

I

40


Future focus Our vision for the future development of industrial capacity is to

reposition the IDC from reacting to market and environmental

forces to being at the centre of the industrialisation paradigm.

Our Project Evolve differentiates between the IDC’s proactive

and reactive roles and the sectors to which these roles apply.

We have identified five different groups of industries:

• Value chains – industries in which our development

activities are proactive:

- Metals, metal products, machinery and equipment,

transport equipment and mining

- Chemicals, plastics and pharmaceuticals

- Agro-processing and agriculture

These industries play a significant role in the South African

economy and we plan to increase their competitiveness and

the economic impact by using a variety of tools including

investment, influencing policy, creating an enabling

environment and facilitating access to new sources of

demand.

Investment in the rest of Africa: 2011 to 2015

2011

R’m

illio

n

2 500

-500

-1 000

2012

2014

2013

2015

1 000

1 500

2 000

0

-1 500

311

-1 3

97500

-2 000

-476

1 76

7

2 03

8

• New industries – nascent industries or technologies that

we nurture to become sizeable, relevant industries of the

future by engaging in activities that increase their likelihood

of success. These industries are critical as creators of

sustainable jobs in South Africa.

• Special high impact opportunities – industries that are

too small to qualify as value chain industries where we play

a critical support role and will continue to do so, specifically

in the media and motion pictures and clothing, textiles,

leather and footwear industries. Our strategic interventions

in these industries will continue going forward given their

high job intensity.

• High impact opportunities – these include manufacturing

industries not covered elsewhere as well as the tourism

industry. The IDC will provide funding to these industries,

but will not take a proactive approach to developing the

sectors.

• Industrial infrastructure – the constraints that infra-

structure bottlenecks place on the development of industry

resulted in IDC reviewing its role in the development

and funding of infrastructure projects. In this regard, IDC

will play the following role for infrastructure that can

unlock industrial development (e.g. electricity, water,

telecommunications and logistics). In these areas, IDC will

be playing a coordination role to ensure that requisite

infrastructure is funded and developed by other funders;

supporting private sector or Public-Private Partnerships

(PPP) industrial infrastructure where it is necessary; and

invest selectively in strategic, economy wide, large scale

interventions.

Case study Cenpower Generation Company

Our funding for construction of Cenpower, a 340MW

combined-cycle power generation plant and

161kW substation in Ghana, will increase the country’s power

generation capacity and help meet future demand. Currently,

low levels of electricity supply subject industries to power

outages of up to 48 hours at a time.

The new plant and sub-station located at Kpone near Tema, a

heavy industrial coastal area near Accra in Ghana, will operate

liquid fuel and natural gas. The plant will house on-site fuel

tanks and a natural gas pipeline linked to the West African Gas

Pipeline.

International, African and South African financiers have invested

approximately USD900 million in the project. A South African

construction and engineering firm Group Five, has been

contracted to build the plant.

41

HE Vice President of the Republic of Ghana, Kwesi Bekoe Amissah-Arthur controls an excavator, on

15 January 2015, to flag the start of the construction of the Cenpower generation plant located in Tema.

42


R159 MILLIONapproved for businesses with

youth ownership of more than 25%

20 388jobs created / saved

R756 MILLIONapproved for businesses with

women ownership of more than 25%

89M TONSCO2 emissions avoided through clean energy

R2.0 BILLIONapproved for

111 SMEs

R4.3 BILLIONapproved for

rural activities

R4.5 BILLIONapprovals in less

industrialised provinces


43

Material matters

IDC funding to businesses with women ownership of more than 25% as well as youth owned enterprises has helped to create job opportunities.

44


Key elements of our development scorecard

Outcome Priority indicators Other indicators

Create sustainable and decent

employment opportunities

• Jobs created/saved

• Job efficiency

Improve regional equity, including the

development of SA rural areas and poorer

provinces and to support industrialisation

in the rest of Africa

• Investment in priority provinces

• Investment in rural areas

• Investment in priority countries

• Contribution to regional value chain

Grow the entrepreneurial and SME

segments• Youth ownership

• Support SMEs

• Support women, youth and disabled

entrepreneurs

Transform and impact on communities

and grow black industrialists

• B-BBEE certificate rating

• Support for black industrialists

• Community investment strategies

• Community ownership

• Employment of local individuals on

projects

Promote environmentally sustainable

growth

• Environmental impact (pollution

prevention; GHG emissions reduction,

energy consumption)

• Water stewardship

Grow sectoral diversity and increase

localisation • Funding localisation initiatives

• Investments support sector

development goals

• Investments support local

procurement

• Export development (% of turnover)

• Export development (value)

sefa was established as a wholly-owned IDC subsidiary in

2012. This enhanced our socio-economic development impact

significantly, specifically in helping small-, micro- and medium-

sized enterprises (SMMEs) and cooperatives to access funding.

Since inception, the substantial growth in sefa’s funding levels

has increased gains in employment considerably, as well as the

number of women – and youth-owned enterprises in recent

years. sefa funding also supports black entrepreneurs and

contributes to regional equity through enterprise growth in

South Africa’s less industrialised provinces.

Contributing to employment creation and preserving jobsCyclical and structural challenges continue to impact on the ability of the South African economy to create sufficient employment for an expanding labour force.

According to Statistics South Africa (Quarterly Labour Force Survey), employment in the formal non-agricultural sectors of the economy expanded by around 17 000 jobs over the twelve-month period to March 2015. Financial services accounted for the largest employment gains, followed by construction activities. Formal employment levels in the trade sector contracted substantially, while manufacturing employment declined by approximately 23 000 jobs.

Inclusive growth and structural transformation are integral to realising South Africa’s full potential and safeguarding its social stability. Our contribution is to

expand and diversify South Africa’s industrial base, in the process facilitating job creation, reducing inequality in our society and promoting environmental

sustainability and economic growth. These objectives are germane to our financing and industrial business support interventions and drive our

development scorecard outcomes to help achieve national priorities and widen the IDC’s impact, locally and in the region.

45

Material matters

Number of new and saved jobs facilitated per year:

2011 to 2015

2011

Num

ber o

f job

s

19 6

6050 000

40 000

30 000

10 000

20 000

02012 20142013 2015

11 6

568

131

34 7

8811

168

18 9

223

950

14 5

375

851

18 2

241

369

3 36

9

New jobs

Saved jobs

New jobs through linkages to informal economy

Given this reality, our top priorities as a development financier

are to facilitate employment creation and preserve existing

jobs. We set our targets annually and strongly encourage the

financing of jobs-rich economic activities through attractive

funding schemes.

The number of jobs facilitated and saved is affected by our level

of approvals and the sectors in which we invest.

We expect our funding approvals in 2015 to create and save

14 537 and 5 851 jobs respectively, or a total of 20 388 jobs. Since

our focus is on developing manufacturing capacity, 56% of the

jobs we expect to create or save are in this sector. These include

many new jobs in industries such as recycling, metal products

and transport equipment (including automotive components)

and agro-processing.

During the reporting period, our financial assistance to textiles

and clothing operations, furniture producers and manufacturers

of engineering products, such as locomotive body structures,

saved a considerable number of jobs. In addition, the dti’s

Clothing and Textiles Competitiveness Programme (CTCP)

complemented by our Clothing, Textiles, Footwear and Leather

Competitiveness Scheme, helped to upgrade and modernise

plant and equipment in the industry. This resulted in greater

competitiveness, increased stability, preserved employment

and growth among beneficiary companies.

Our financing of mining and mineral beneficiation activities also

yielded a large number of new employment opportunities and

saved many jobs, particularly in copper mining. In the services

sectors, we contributed to job creation in the information and

communications technologies (ICT) and film industries.

We expect that sefa’s overall financial disbursements of

approximately R1.3 billion in 2015 will have facilitated around

60 000 jobs. Apart from funding support to micro-enterprises

and cooperatives through financial intermediaries, sefa’s SME

funding created a total of 6 607 jobs.

Promoting regional equity

We promote the development of less industrialised provinces

and rural areas in South Africa to improve regional equity.

Our network of regional and satellite offices provides clients

with access to our staff and services in those areas. Potential

clients and less experienced small enterprises benefit from new

business opportunities and our nurturing of key high-impact

projects taken to commercialisation.

We engage provincial, district and municipal stakeholders in

local economic development (LED) matters and network with

regional DFIs and local development agencies. Our pricing

mechanisms reflect the relative benefits of such regional

development outcomes.

Growing economies in less industrialised provinces

The IDC invested R9.7 billion or 84% of total funding in financing

South African operations in 2015. Gauteng and the Northern

Cape received approximately R3 billion and R2.3 billion

respectively.

South Africa’s less industrialised provinces (these exclude

Gauteng, Western Cape and KwaZulu-Natal) collectively

received 46% of IDC funding and accounted for 42% of the

jobs we expected to create and/or save. This ratio exceeded

their collective 36% share of national GDP (based on 2013 data)

and attests to our efforts to raise economic activity in those

provinces. Funding in the Northern Cape (23.5% of the total)

went to manganese mining activities, as well as solar and wind

energy projects.

Gauteng and Limpopo respectively accounted for approximately

35% and 20% of the 20 388 jobs we expected to create and/or

save during 2015. Most of the employment opportunities created

in Limpopo were in copper mining, while employment creation

in the Free State, North West and Eastern Cape represented 6%,

11%, and 10% of the expected total respectively.

46


Approvals to companies in rural areas (value) per year:

2011 to 2015

2011

R’m

illio

n

9 000

5 000

4 000

02012 20142013 2015

3 61

8

8 46

1

6 08

0

6 54

6

4 28

5

7 000

8 000

2 000

41%

63%

46% 47%

37%6 000

3 000

1 000

70%

60%

50%

40%

30%

20%

10%

0%

Provincial distribution of approvals in 2015

3.7%

30.3%0.8%

23.4%

7.0%7.1%

6.7%

17.6%

4.3%

sefa funding in less industrialised provinces amounted to

R636 million during 2015, of which R423 million went to SMEs.

Contributing to rural development

We appreciate the need to integrate rural areas into the economy

and rural development perspectives into industrial development

strategies. In this, our role is to identify opportunities that can

improve livelihoods in rural communities proactively, but we

avoid duplicating the activities and mandates of other role

players, such as the Land and Agricultural Bank of South Africa.

We have focused our rural development activities primarily

in the NGP- and IPAP-prioritised sectors, such as minerals

beneficiation, high-value agriculture and agro-processing.

A range of on-balance sheet development funds (such as the

Agro-Processing Linkages Scheme, Pro-Forestry Scheme and

Community Fund) and the funds we manage for third parties

(including the Agro-Processing Competitiveness Fund on behalf

of Economic Development Department (EDD)) support our

efforts. Refer to Section 5 online for details of special

funding schemes. Our support for the establishment of

local economic development agencies complemented

the financing activities of our operational units with significant

rural portfolios.

During the past five years, the IDC invested R28.8 billion in rural

areas. In 2012 alone, investments of approximately R8.5 billion

funded renewable energy operations in rural areas, which

represented 47% of the total funding approved for these areas.

Rural transactions amounted to R4.3 billion or approximately

37% of the total funding approved in 2015. We expect this

to create or save 8 223 jobs. Cumulatively, we facilitated the

creation or saving of around 46 130 jobs in rural areas during

the past five years.

Most of the funding in rural areas was distributed in the mining

and renewable energy sectors. We expect funding approved for

the agro-industries during the past financial year to create new

jobs in rural areas.

Jobs facilitated in rural areas per year: 2011 to 2015

2011

Num

ber o

f job

s

25 000

10 000

5 000

02012 20142013 2015

6 66

4

21 3

82

5 95

3

3 90

8

8 22

3

15 000

20 000

Rural area approvals as a % of total approvals

Approvals to companies in rural areas (value)

South AfricaR9 712 million

47

Material matters

Contributing to the development of other African economies

Positive, fundamental change in many African countries in

recent years tells a good story and has stimulated interest

among domestic and foreign investors. Sub-Saharan Africa

has been among the world’s fastest-growing regions. Business

environments have improved and macro-economic stability

taken root in a number of countries.

We approved R1.8 billion in 2015 for operations in the following

10 African countries: Zambia, Uganda, Mali, Ivory Coast,

Swaziland, Democratic Republic of Congo, Ghana, Namibia,

Rwanda and Ethiopia. The funding pertains to a diverse set of

business activities that contribute to economic development,

such as energy generation, mining, manufacturing of wood and

paper products, hotel services and funding facilities for other

Development Finance Institutions (DFIs) to on-lend to business

operations.

This widens our continental footprint outside South Africa to 23

African countries.

In addition to funding projects, we build capacity in other DFIs

on the continent. During the reporting year, 107 employees

from local and regional institutions attended IDC-funded

training. This included 25 employees from 11 African DFIs who

attended our training session in Dar es Salaam in Tanzania.

The IDC’s African footprint (excluding South Africa) as at

31 March 2015

119

23

22

2

1

12

3

19

14

217

4

17

132065

16

15

10

1. Angola2. Botswana3. Congo (DRC)4. Ethiopia5. Ghana6. Ivory Coast7. Kenya8. Lesotho9. Malawi10. Mali11. Mozambique12. Namibia13. Nigeria14. Rwanda15. Senegal16. Sierra Leone17. Sudan18. Swaziland19. Tanzania20. Togo21. Uganda22. Zambia23. Zimbabwe

48


Enterprise development Small and medium enterprises

World wide, SMEs are recognised as engines for economic

growth and job creation and acknowledged as a critical source

of enterprise and innovation.

Government policies and public sector strategies have had a

positive impact in expanding and sustaining South Africa’s SME

sector. However, some enterprises still find it difficult to access

finance, technology and information, or the skills to develop

capacity and capabilities.

A large proportion of our funding over the years went to

support thousands of SMEs, although transactions involving

larger corporations generally dominated the overall value of the

approved funding.

Establishing sefa in 2012 was an important milestone in

coordinating SME development. As a result, we can focus on

larger transactions to complement rather than duplicate sefa’s

services. This avoids market confusion, stimulates economic

activity and creates a demand for SME products and services.

During the 2015 financial year, IDC’s SME financing doubled

to R2.0 billion (2014: R1.0 billion) and benefitted 111 small

business enterprises.

Value of approvals for SME’s per year: 2011 to 2015

2011

R’m

illio

n

2 500

1 000

500

02012 20142013 2015

1 16

3

2 31

4

1 71

1

1 02

6

2 01

0

1 500

2 000

Number of approvals for SMEs per year: 2011 to 2015

2011

200

140

120

02012 20142013 2015

160

180

100

80

60

40

20

137

186

126

100

111

In turn, sefa’s funding impact in the SME sector is increasing

year on year. In 2015, sefa approved SME funding of

R942.7 million (excluding cooperatives and micro-enterprises),

while disbursements increased to R1.06 billion or 79% relative

to the previous financial year. A total of 1 262 SMEs (2014: 817)

benefitted from this financial support.

Women-owned enterprises

Stimulating entrepreneurship among South African women

and empowering women entrepreneurs to establish and grow

their businesses in the mainstream economy through access to

finance are imperatives that we pursue with vigour.

Value of funding to companies with significant female

ownership* per year: 2011 to 2015

2011

R’m

illio

n

800

500

02012 20142013 2015

600

700

400

300

200

100

71 369

272

325

756

*Companies with a female shareholding of at least 25%

49

Material matters

During the past five years, the value of IDC approvals for

female-owned companies with at least 25% shareholding rose

significantly, from R71 million in 2011 to R756 million in 2015.

Funding beneficiaries during the year under review ranged from

companies involved in mining and chemicals manufacturing to

renewable energy generation, including wind power.

The challenges, however, are in identifying and/or attracting

new women entrants into the enterprise sector. At the end

of the current reporting period, our Women Entrepreneurial

Fund, launched in 2008 to provide women entrepreneurs

with attractive financing packages to start or expand their

businesses, had drawn only R92 million of the available

R300 million. The fund limits transactions to R40 million each,

allocated to companies with an asset base of R80 million or less.

As such, the fund targets smaller enterprises where women have

a shareholding of at least 25% (with the maximum benefits

accessible if it exceeds 50%) and are involved operationally.

Our subsidiary, sefa, disbursed R259 million to 403 women-

owned SMEs (excluding cooperatives and micro-enterprises) in

2015 (2014: R161.6 million to 276 women-owned enterprises).

Youth-owned enterprises

In April 2013, we signed the Youth Accord and reallocated R1

billion from the existing R10 billion Gro-E Youth Scheme to

the Gro-E Youth Scheme. The IDC and sefa partnered with the

National Youth Development Agency (NYDA) to provide young

entrepreneurs with access to development finance and NYDA

grants.

The Gro-E Youth Scheme contributes to sustainable job creation

by providing businesses that will create new jobs with loans at

prime less 3%. Persons under the age of 35 with more than 50%

shareholding in the business qualify for financing.

During the reporting period, we approved R159 million in

total for 11 companies with youth shareholding of more than

25% including through the Gro-E Youth Scheme. To support

activities that range from ICT to media, tourism, textiles and the

manufacturing of food supplements an amount of R35.7 million

has already been disbursed.

In turn, sefa disbursed R249.4 million to 252 youth-owned

SMEs (excluding cooperatives and micro-enterprises) in 2015

(2014: R109.6 million to 152 enterprises).

In 2013, we approved a R10 million business support grant to

the NYDA to fund its non-financial services voucher programme.

The programme provides an array of non-financial products,

such as business plan development, accounting and financial

systems, business administration and marketing (branding and

website development) support. An amount of R14 million was

disbursed in December 2014 and we expect a further R6 million

to be paid in the 2016 financial year in tranches of R3 million

each.

Our commitment to providing young people in South Africa

with a skills set that makes them marketable, remains robust.

During the reporting period, we used platforms such as

Graduate Internship Programmes and a Chartered Accountant

Learnership to pursue this objective. We introduced a

Learnership Programme for disabled people, with 30 learners

from three provinces and partnered with Scaw Metals to launch

an Apprenticeship Programme, in which, 30 apprentices from

trades, such as electrical, boiler-making and fitting and turning,

participated. In total, 116 young people benefited from these

initiatives.

In partnership with Harambee, a non-governmental organisation

(NGO) that assists young, first-time job seekers to gain skills

and find jobs, the corporation has contributed significantly to

easing the plight of unemployed youth. Since inception about 5

years ago, this initiative spearheaded by Harambee has helped

to place 12 000 young people spread over 100 employers. With

our support, Harambee selected, profiled and graduated 150

young people in the Northern Cape from an intense literacy and

numeracy bridging programme.

Promoting transformation

Over the years, our support to black entrepreneurs to establish,

grow and diversify their businesses broadened the scope of our

BEE funding and other forms of business support in line with

evolving national policies. Since 2008, we have adopted an

‘expansionary’ BEE approach by funding acquisitions only if a

significant amount of capital remained in the business to fund

its expansion.

We supported black managers to buy businesses from

employers, assisted black entrepreneurs to establish new

companies and funded existing black-owned businesses to

expand their operations. We recently also reviewed our approach

to BEE to further support black industrialists to participate in the

South African economy.

50


Approvals for BEE empowered companies per year:

2011 to 2015

2011

R’m

illio

n

10 000

6 000

5 000

02012 20142013 2015

8 000

9 000

3 000

30%

41%43%

38%

51%

7 000

4 000

2 000

60%

50%

40%

30%

20%

10%

0%

1 000

2 63

4

5 59

6

5 63

3

5 19

6

5 90

7

Approvals for BEE empowered companies as a % of total approvalsValue

During the past year, we approved 85 transactions valued at

R5.9 billion for black-empowered companies with black

individual shareholding of more than 25%. At 51% of the overall

value of funding approvals, this was a significant improvement

over the previous year and accounts for 10 974 of the 16 037

new jobs we expect to create.

Approximately R2.0 billion was approved for 41 black

industrialists, which we expect will create around

2 970 new jobs, mainly in manufacturing operations. These

black industrialists will be active in a variety of manufacturing

industries, such as wood and wood products, metal products,

machinery and equipment, transport equipment, plastic

products, clothing, textiles and footwear, and food products.

Some will be involved in the services industries, such as energy

generation, ICT and media, while others will be active in the

mining industry.

We continuously encourage our clients to introduce

shareholding for workers and communities to empower and

include them as active participants in the business sector. As

such, an important funding requirement is for beneficiary

companies to commit to transformation targets aligned with

the B-BBEE Codes of Good Practice.

During the year under review, sefa disbursed R782 million to

1 063 black-owned SMEs. This represents 74% and 84% of the

value of approvals and number of transactions respectively.

Community development

The already positive impact of our funding on economic

activity and job creation in rural areas is further enhanced by

the benefits that accrue to communities through trusts, spatial

interventions and the financing of social enterprises.

Examples include funding approved in 2015 for three

agri-business transactions to provide workers’ trusts with

shareholding in horticulture, fruit processing and animal feed

businesses and R4.9 million allocated to the Eastern Cape

Disability Economic Empowerment Trust. The latter holds

a 10% shareholding in Rhythm FM, a broad-based black

economic empowerment entity established to create economic

opportunities for people with disability in the Eastern Cape.

Currently, 191 000 disabled people benefit from the Trust.

Capacitating workers’ trusts is an imperative. Our initiatives

in the energy and agro-industry sectors during the past year

ensured that previously excluded workers now have the acumen

to understand business operations.

We support development agencies to escalate social and

economic development within marginalised communities and

leverage the developmental and job creation potential within

those communities for their own benefit. We support the

Municipal Agency Programme to create mutually-beneficial

partnerships between the public, private and civil society sectors

through the Special/Spatial Intervention Initiative. We also used

the Social Enterprise Fund to grow the social enterprise sector.

We approved R18 million in 2015 for six development agencies to

move beyond the establishment phase. These agencies extend

our footprint in remote areas as useful conduits for projects and

business opportunities. The agency model has become integral

to local economic development for municipalities.

Seventeen special/spatial interventions with commitments

of nearly R60 million were funded during the year and have

leveraged more than R40 million in co-funding from partner

organisations to date. Many of these initiatives are based in

some of the most marginalised communities, including remote

rural areas and townships.

We also supported 10 social enterprises during the past year

with awards of nearly R35 million. These businesses have a

social and/or environmental mission to address challenges in

marginalised communities by providing sustainable jobs for

vulnerable groups.

Case study:Nobomate Material Recycling Facility

Nobomate which has since been acquired by NGX provides waste

management services to approximately 90 000 households

in Atteridgeville, Lotus Gardens and Olievenoutbosch in the

City of Tshwane. These services include the weekly removal of

household waste and litter, prevention of illegal dumping and

community-based recycling initiatives. Nobomate will establish

the first of four material recycling facilities at the Kwagga landfill

buffer zone to support the City of Tshwane, through its Integrated

Development Plan, to reduce waste to landfills by 50% by 2016.

The business model will provide waste management services

and create more than 100 jobs in local communities.

51

Nobomate’s business model centres on refuse collection and is expected to create over 100 jobs.

52

The many opportunities that exist for collaboration with

the private sector to address the developmental needs of

marginalised and vulnerable people and communities spurred

strategies and partnerships to identify, facilitate and finance

business activities that provide disadvantaged and marginalised

people with jobs as producers, suppliers, workers, distributors,

consumers or innovators. During the period under review we

initiated various such projects that will come to fruition in the

new financial year.

Towards environmental sustainability

We remain committed to contributing to a greener (cleaner)

economy in South Africa and the national goals of reducing

carbon emissions by 34% from business-as-usual levels by 2020,

and by 42% by 2025.

Growing the green economy

Our support for green economy projects in South Africa

and other African countries are in renewable energy, energy

efficiency, biofuels and fuel-based clean energy, as well as

emission and pollution mitigation.

We successfully participated in the first four bidding rounds of the

Department of Energy’s (DoE) Renewable Energy Independent

Power Producers Procurement Programme (REIPPPP) through

the Renewable Energy Cluster. Twenty-three solar (photovoltaic

and concentrated), wind and hydro-power projects received

preferred bidder status and a potential exposure of R13.1 billion.

These projects will produce electricity with zero carbon dioxide

(CO2) emissions during their expected 20-year lifetimes and

avoid CO2 emissions as indicated in the related table.

A number of these projects were commercialised during the

review period, while the Kakamas Hydro Electric Power Plant in

the Orange River; KaXu concentrated solar plant near Pofadder,

Northern Cape; photovoltaic power plants in the Northern Cape

and North West; and a number of wind farms in the Eastern

Cape and Western Cape, were officially opened.

Expected avoidance of CO2 emissions associated with

IDC- funded REIPPPP projects

TechnologyMW

installed

Expected

GWh over

20 years

Expected ktonne

CO2 emissions to be

avoided

Photovoltaic 213 9 152 8 347

Concentrated

Solar350 34 519 31 481

Hydro 10 1 438 1 311

Wind 835 52 427 47 813

Total 1 408 97 536 88 953

KaXu Solar One in the Northern Cape is one of the IDC-supported renewable energy projects. This 100 MW concentrated solar plant is contributing to the national grid and helping South Africa meet its growing energy demand.

53

Material matters

We supported 12 bids of 60 MW in total under the Renewable

Small Independent Power Producer Programme and developed a special funding package using the ‘green’ facility of the Agence Française de Développement (AFD) to offer long-term fixed interest loans at a competitive rate, as well as special renewable funding for BEE shareholders.

By the end of the financial year bid awards had not been made but the available AFD credit line was fully committed. This included approved funding for a further five small, own-use or willing buyer renewable energy projects in biogas (1), hydro (1) and biomass (3). The current pipeline of projects will absorb this funding even if bid awards are insufficient.

Subsidised ‘green’ funding to finance energy-efficient and renewable energy investments is also available from the R570 million KfW (German Development Bank) Green Energy Efficiency Fund (GEEF). During the past year, we approved R366 million for 12 projects. The increased uptake was due to escalating electricity prices, greater awareness of energy efficiency and the funding of larger entities. The investments include the mass rollout of energy-efficient lighting and showerheads, solar water heaters, rooftop photovoltaic (PV), cogeneration, biogas to energy, energy-efficient refrigeration and industrial energy efficiency.

A new project included the funding and commissioning of fuel cells at the Chamber of Mines. The technology uses platinum as the catalyst, with the potential to provide distributed clean energy and increase the demand for platinum, of which South Africa has almost 90% of the global resource. This is the first fuel cell project for a commercial building in Africa.

The GEEF investments will achieve 523 000 MWh in energy savings annually, with an associated reduction in greenhouse gas emissions of 480 000 tonnes CO2–equivalent per year. Support for biogas projects and the Cogeneration Independent Power Producers (IPP) are still outstanding.

Providing South Africa’s transport sector with green energy can reduce greenhouse gas emissions significantly. We continued to play a leading role in the Cradock grain sorghum project to develop bio-ethanol as a petrol blend and cleaned and compressed biogas as fuel for fleets such as taxis and municipal buses. Regulatory certainty about incentives for green energy sources and their impact on job creation is required before we can invest further in this area.

During the past year, we approved finance for two projects at municipalities to reduce solid waste through recycling and converting non-recyclables to energy.

As an enabler of the Presidential Infrastructure Coordinating Commission’s Strategic Integrated Projects (SIPs), we have been coordinating SIP 8, which focuses on Green industries. We

financed four green energy projects in other African countries, two that use biogas, and two biomass to generate power.

Assessing and monitoring clients from an environmental and social perspective

The Environmental and Social (E&S) framework at the IDC guides the creation of an amenable environmental and social environment. The framework describes our approach to categorising E&S risk at the due diligence stages of pre-investment and during post-investment monitoring.

We use a checklist to screen investments for E&S risks such as human rights (child labour), social impact (HIV), retrenchment practices and local community impact, as well as environmental issues like land-use, biodiversity, energy, water and air pollution. We also advise and guide clients in being environmentally and socially responsible, which includes avoiding or mitigating E&S impacts. In support of decent work objectives, IDC ensures its clients comply to relevant labour legislation.

We monitor E&S for existing clients annually, according to their risk category, shareholding and previous performance. Environmental and Social Risk Rating (ESRR) is used to rate performance on a scale of 1 to 4, where 1 is excellent and 4 unacceptable and a breach of the IDC/client agreement. During the review period, 60 clients were assessed and 54 received good ratings. We will reinforce E&S compliance with corrective measures at the six who rated poorly to improve their risk rating to acceptable levels.

Dedicated resources were allocated during the past financial year to provide continuous support and implement specific rehabilitation programmes at African Chrome, the Columbus Joint Venture, Scaw Metals and Foskor. Rehabilitation, care and maintenance at African Chrome and the Columbus Joint Venture waste dump cost the IDC R1.5 million and R14 million respectively.

Reducing water usage

The aim of our water strategy, which is applied through the

Green Building Project, is to reduce water usage in all IDC

and business partner offices, as well as to maintain our water

infrastructure and monitor leakages.

Despite the implementation of a water usage monitoring

programme at our head office, the overall use of water increased.

However a notable achievement is that IDC is less reliant on tap

water. This is being addressed going forward.

54


Water consumption at the IDC head office

Building/Area2015 Consumption

(kl)

2014 Consumption

(kl)

Head office 18 848 20 285

Borehole 5 082 1 951

Total 23 930 22 236

We partnered with selected businesses to collect water-use data. The 2014 data will serve as a baseline for subsidiaries to improve water-use management.

We have made good progress in achieving our water management goals. Forty business partners were assessed for water risk during 2015, compared to 32 during the previous year. Our Memorandum of Understanding with the National Cleaner Production Centre will assist our business partners in the agro-processing and textiles industries to conduct water efficiency audits at their processing and production facilities and improve water-use efficiency.

Carbon footprint

As the spotlight turns towards the Conference of Parties (COP21) and the development of a new global emission reduction framework to replace the Kyoto Protocol in Paris later this year, we ensured that our investment policy embraces a low-carbon economy within our operational boundaries.

The carbon tax bill, currently under discussion for possible implementation in 2016, could have a negative financial impact since we expect the total CO2 emissions of our subsidiaries to exceed the threshold of 0.1 Gt per year. We are using a scientific-based targets methodology developed by the World Resource Institute and United Nations Environment Programme Financing Initiative to develop an emission reduction strategy.

In addition to actively participating in and supporting the activities of the National Business Initiative by voluntarily disclosing our carbon profile to the Carbon Disclosure Project, we followed the G4 guidelines of the Global Reporting Initiative (GRI) to report our carbon emissions. Minor changes were observed in Scope 1 (direct emissions) of the emissions inventory.

Our greenhouse gas inventory IDC Head office, regional offices

Kindoc Airways

Emission activity (tCO2e)2015

(unverified)2014

(verified)2013

Scope 1Aircon gas (R22) 119 98 284.7Refrigerant (R134 a) 0.7 2 0Fleet cars 63 68 54.3Generator fuel 22 9 8.9Jet fuel 338 230 281Sub-total (Scope 1) 543 407 628.9

Scope 2

Electricity 5 748 6 043 6 267.1Total (Scopes 1 & 2) 6 291 6 450 6 897.0

Source of Emission Factors: DEFRA, Carbon Trust, Eskom website, NOVA, IPCC and Carbon Trust.

Our energy consumption and intensity

Activity data Energy (Gj)Energy intensity

Per area, m2

(25 220)

Per employee

(825)Diesel 363 0.01 0.44Petrol 645 0.03 0.78Stationary fuel 130 0.01 0.16Jet fuel 4 170 0.17 5.05Electricity 20 091 0.80 24.35Total 25 399 1.01 30.78

Adding the emissions inventory (Scopes 1 and 2) of our

business partners to our own emissions inventory, as depicted

in the following graphs, will have a financial impact if carbon

tax legislation is enacted. The energy intensity of these business

partners suggests the need for an energy reduction strategy.

55

Material matters

36%

58%

Changes in the IDC emissions due to inclusion of subsidiaries

Scope 1

Scope 2

Scope 3

6%

27%

+BP

BP = Business partners or subsidiaries

IDC

CO2 e

mis

sion

s (%

)

60

0

50

40

30

20

10

Fosk

or

Scaw

Sher

aton sefa

Her

dman

s

Prill

a

IDC

CO2 e

mis

sion

s (%

)

80

0

60

40

20

Fosk

or

Scaw

Sher

aton sefa

Her

dman

s

Prill

a

73%

The IDC has partnered with Samancor and Evraz Highveld Steel and Vanadium to rehabilitate this waste dumpsite in Middelburg, Mpumalanga.

56



Surveys have shown that while the first priority of stakeholders of a company is the quality of the company’s products or services, the second priority is the

trust and confidence that the stakeholders have in the company. – King III

Defined as the sum of stakeholder perceptions, an organisation’s

reputation is at the heart of business success or failure. The

scandals that rocked the business world at the start of the

21st century emphasised the importance of building,

maintaining and defending corporate reputation. Integral to

that reputation is successful stakeholder relations.

Some of our key stakeholders

Minister of Economic Development (shareholder) Board of directors Employees Clients/customers

Subsidiaries and associates

National, provincial and local government

departments

General public and the media

Co-investors, co-funders and funders to the IDC

Industry bodies, associations, business

chambersState-owned enterprises Regulatory bodies Communities, NGOs and

academic institutions

57

Material matters

We rely on partnerships to fulfil our industrial development

mandate. We believe that effective stakeholder engagement

enables us to create and embed partnerships that augment the

pursuit and achievement of our mandate. While stakeholder

engagements occur daily throughout the organisation, they

must support the fulfilment of our mandate.

Managing stakeholder relations is therefore integral to our

corporate strategy, not as an intervention, but as a planned

process guided by robust business principles. We scan, assess

and interpret our business landscape continuously to identify

stakeholder interests and concerns and match issues to their

spheres of influence.

We believe that effectively engaging our stakeholders leads to mutually-

beneficial relationships and the ability to meet and exceed expectations.

Our stakeholders fall into three categories: our people, our

clients and other stakeholders.

We developed a stakeholder engagement strategy in 2014

and plan and communicated it throughout the corporation to

coordinate and ensure consistency in stakeholder engagements.

The strategy and plan are integrated into Strategic Business

Units (SBUs) and departmental business plans. The high-level

implementation plan will be updated by the relevant SBUs and

departments. The managers responsible for engagement will

submit a progress report every 6 months, while the department

will generate the overall corporate report.

Our stakeholder interactions during the past year included:

• Engagements by IDC executives, SBUs, departments and

regions with their various stakeholders

• External marketing and communication initiatives using

television, print, radio and online platforms

• Interaction with internal stakeholders and staff nationally,

using various IDC communication platforms

Our people

Human capital represents all our resources – the knowledge,

skills, abilities, experience, intelligence, training, judgement and

wisdom of our staff, individually and collectively – as the total

capacity and wealth of the IDC that we use to accomplish our

goals and carry out our mandate.

Driving our mandate by engaging and supporting our people

As a leader in industrial development finance, we need the right

people, with the right skills, values and behaviours to help us

deliver on our mandate of serving industries, business partners,

stakeholders and the South African economy.

We enable our people to achieve their full potential through

professional and personal growth in an environment where

we encourage leadership and living our organisational values

to create a quality work life. Our performance-driven culture

provides people with the necessary tools, processes and

resources to serve our clients, engage our stakeholders and

work productively.

Importantly, we believe that recognising and rewarding our

people for hard work and commitment is important and sets

the stage for performance excellence.

58


Our people – diverse, talented and empowered

• Encouraging

diversity and

representivity for

business success

• Creating an

employee profile

that encourages

the sharing of

knowledge, skills and

expertise

• Creating a

national footprint

through regional

representivity

• Appreciating

generational

diversity (age profile)

• Driving

transformation

(planned and actual

employment equity

commitments) and

gender parity

Driving a change-enabled culture conducive to success

• Embedding a culture

that supports our

business

• Leading and

encouraging

employee

engagement

• Driving key

behaviours that

define our business

• Driving performance

through our people

• Taking firm and

decisive action to

ensure appropriate

employee conduct

Attracting and retaining top talent

• Understanding

the mobility and

movement of

employees

• Appreciating the

talent we attract and

understanding the

reasons for the talent

we do not retain

(turnover)

• Facilitating and

implementing

an appropriate

recognition and

reward philosophy

• Creating a work

environment that

is conducive to

productivity and

an enjoyable and

rewarding work life

Investing in, recognising and rewarding our people

• Providing needs -

based learning and

development

• Providing a talented

pipeline for business

continuity

• Being mindful of the

health and wellness

of our staff

• Investing in our

youth as the future of

our country

Our approach to managing, growing and empowering human capital

The talented and diverse people in our organisation

Our staff complement remained fairly static compared to the

previous financial year, with a slight reduction of 0.4% in the

number of employees. The complement of 825 employees

consists of 801 full-time, permanent employees and

24 employees on three-year, fixed-term contracts, of whom 12

are employed at the IDC Crèche and 12 are trainee accountants

on a learnership. During the review period, the services of four

temporary contractors were used.

59

Material matters

Staff complement: 2013 to 2015

Staff complement 2015 2014 2013

Total permanent headcount as at 31 March 825 828 812

Employment Equity representation of total staff complement 90% 89% 89%

Female representivity of total staff complement 53% 52% 51%

People with disabilities within the total staff complement 1.7% 1.3% 1.1%

Regional staff complement as a proportion of total staff complement 6.8% 6.0% 5.6%

53% 47%

We firmly believe that a diverse and generational age mix within

the organisation stimulates new and divergent thinking and

enables us to capitalise on the tacit and explicit knowledge,

skills and experience amongst our employees.

Staff profile by age: 2015

12%

40%

16%2%

30%

20-29 years

30-39 years

40-49 years

50-59 years

60+ years

Staff profile by equity and gender: 2013 to 2015African (65%)

Coloured (8%)

Indian (9%)

White (18%)

2015

Tota

l 825

295244 26 39 35 38 82 66To

tal 8

28

2014

278247 27 43 37 37 88 71

African (63%)

Coloured (8%)

Indian (9%)

White (20%)

Tota

l 812

2013

259246 26 42 37 38 90 74

African (62%)

Coloured (8%)

Indian (10%)

White (20%)

Staff profile by gender: 2015

60


Aligned with the nature of our business, 76% (2014: 75%) of our employees are professionally qualified specialists who fulfil roles at

executive, management and professional levels. The employee representivity by bands is reflected in the table below.

Employee composition by band

Employee group Band

Headcount 31 March

2015

Headcount % per band

31 March 2015

Headcount 31 March

2014

Headcount % per band 31 March

2014

Headcount 31 March

2013

Headcount % per band

31 March 2013

825 100 828 100 812 100

Executive management E band 9 1 9 1 9 1

Senior management M1, M2 bands 52 6 50 6 51 6

Management M band 228 28 226 27 215 27

Professional staff P band 329 40 340 42 341 42

Administrative staff A band 197 24 192 23 186 23

Support staff S band 10 1 11 1 10 1

Staff per region excluding head office employees

Eastern Cape

12

8

06 6 10 5

10

10 6 11 6

2013

2014

6

4

2

4 3 6 6 7 8 7 6

Free State KwaZulu-Natal Limpopo Mpumalanga North West Northern Cape Western Cape

2015

7

Num

ber o

f sta

ff

4 10 5 2 7 5 6

A national footprint

Our national footprint ensures that we respond to the specific

business needs and opportunities in all regions. As at the end of

March 2015 we employed 56 staff in regional offices compared

to 51 in the previous year. The 9.8% increase was due mainly

to extending our presence to outlying areas in a number of

provinces. The graph below shows our employee numbers in

the different provinces other than Gauteng.

61

Material matters

Employment equity targets for 2015

Occupational category

Male Female Total Target

Total ActualAfrican Coloured Indian White African Coloured Indian White

Targ

et

Act

ual

Targ

et

Act

ual

Targ

et

Act

ual

Targ

et

Act

ual

Targ

et

Act

ual

Targ

et

Act

ual

Targ

et

Act

ual

Targ

et

Act

ual

Mal

e

Fem

ale

Mal

e

Fem

ale

Top Management (E Band)

4 4 0 0 1 1 1 1 4 2 0 0 0 0 1 1 6 5 6 3

Senior Management (Heads & Champions)

17 10 4 2 5 3 23 23 13 11 0 0 1 1 3 1 49 17 38 13

Professional Qualified & Mid Management (M Band)

77 72 16 9 19 20 42 37 62 38 13 8 12 10 17 16 154 104 138 72

Skilled Technical (P Band)

97 99 14 12 14 10 20 19 99 114 18 16 16 21 26 23 145 159 140 174

Semi-skilled and discretionary decision-making (A Band)

28 32 4 2 1 0 3 2 93 115 17 14 8 6 23 24 36 141 36 159

Unskilled and defined decision-making (S Band)

5 8 1 0 0 0 0 0 3 2 1 0 0 0 0 0 6 4 8 2

Total 228 225 39 25 40 34 89 82 274 282 49 38 37 38 70 65 396 430 366 423

Driving transformation in our business

Our staff composition is aligned with the IDC’s employment

equity plan to fairly represent South Africans and people from

other countries. Foreign nationals represent 4% (2014: 4%)

of our staff, of whom 3% (2014:0.1%) are in senior manager

positions. The IDC ensures that it hires the requisite skills

and capabilities from designated groups in line with the

demographic representation of the South African population.

Employees from ‘designated groups’ fill 60% of our executive and

senior management position, which is in line with South Africa’s

B-BBEE aspirations. The current foreign national headcount is

in line with our equity plan for the year.

We continued to focus on implementing employment equity

and inculcating a culture of diversity and inclusivity. The staff

composition in relation to our employment equity targets for

race, gender and occupation level as at the end of March 2015 is

reflected in the table below.

Our employees are well represented in the skilled technical

and semi-skilled occupational categories, while representation

at the professionally qualified and senior management levels

needs to improve to align it with the equity plan. The skilled

technical level acts as a “feeder” into the senior management

level. The representation of African females improved by 3.3%

compared to the previous reporting period, while we achieved

a 27% increase in employing people with disabilities since 2012.

Going forward, we will continue to improve representivity at

senior management and management levels and for people

with disabilities. Accelerated and focused development will

continue to be a priority to create a talent pool with which to

achieve our business strategy. We are developing an aligned

2016-2018 employment equity plan to our revised strategic

operational business model.

62


Talent attraction and retention rates (%): 2013 to 2015

Staff/attraction and turnover retention indicator2015 2014 2013

% % %Overall staff turnover 10.7 7.1 6.1Turnover of female employees 9.6 7.7 5.3Turnover of male employees 12.1 6.3 6.5Employee turnover younger than 29 9.7 9.1 3.5Employee turnover between 30 and 50 11.9 7.2 6.3Employee turnover over the age of 50 5.7 4.4 7.7Turnover in specialist/expertise, management and executive roles 9.7 5 6.3Female new employees 61 66 48New employees in provincial offices 12.4 9.5 9.8New employees from designated groups 98 95 91New employees younger than 29 51 27 26New employees between 30 and 50 49 70 72New employees over the age of 50 0 3 2Permanent employees younger than 29 12 10 13Permanent employees between 30 and 50 72 74 74Permanent employees over the age of 50 16 16 13

Attracting and retaining talent to deliver our mandate

We strive to be recognised as an employer of choice that creates value in the work lives of current and future employees. While it is encouraging that skilled and talented people want to join the IDC family, attracting and retaining the best people from sectors

and industries with more flexible remuneration practices, specifically senior staff with critical and scarce skills, remains a challenge. Over the past year we recruited 89 new employees (2014: 74 and 2013: 92).

The changes to our permanent employee profile during the past three financial years are reflected in the table below.

As was evidenced by the 3.6% increase in overall staff turnover and 4.7% in the specialist/expertise management and executive roles during the reporting period, our challenge is to manage and retain talented employees. While turnover levels compare favourably with industry norms (Financial services industry: 19.3%), losing skilled talent, particularly at the senior level, could impact significantly on our ability to serve our stakeholders. Staff mobility is primarily influenced by career growth opportunities, financial considerations and career progression limitations, which influence the loss of talent in our business.

Diversity, fresh thinking and a depth of expertise in our business requires a positive, cross-generational balance of staff. In this regard, a significant number of new employees below the age of 30 joined our ranks, which complements our ability to respond with agility to complex and diverse stakeholder needs and creates a new platform for employees to share knowledge, skills and expertise.

We are committed to developing a staff profile that is aligned with the demographic profile of the country and the stakeholders, communities and partners we interact with every day. Our focus, therefore, is on attracting talent from designated groups to drive representivity and inclusivity in our business.

Staff movement for the period: 2013 to 2015

Staff actuals 2015 2014 2013

Employees as at 1st April 828 812 768

Added through recruitment 86 74 92

Lost through resignation (75) (53) (35)

Lost through death (1) 0 (1)

Lost through retirement (2) (3) (6)

Lost through dismissal (9) (1) (4)

Lost through ill-health (2) 0 0

Lost through contract expiry 0 0 (1)

Lost through other reasons, (i.e. subsidiary deployment) 0 (1) (1)

Total employees at end of period 825 828 812

63

Material matters

Recognising and rewarding our people

Since our employees are integral to achieving our corporate

objectives, we strive to keep them engaged, motivated and

appreciated, and endeavour to attract and retain high-calibre,

high-performing individuals who subscribe to the values and

culture of the Corporation.

Our remuneration strategy is aligned with our business strategy

and we remunerate and reward our employees fairly, equitably

and consistently on individual performance. We conduct

remuneration benchmarks to monitor market trends and

evaluate each position within the IDC relative to these trends

as well as societal inequalities, internal equity, affordability and

competitiveness.

Over and above the normal statutory benefits such as leave, staff

benefits provided include provident fund, medical aid, insured

benefits (death and disability), child care facility, gym, formal

study support (bursaries), performance incentive schemes,

canteen facilities and vehicle and household insurance through

IDC insurers. Fixed-term contract employees are afforded the

same benefits with the exception of participation in the IDC

incentive schemes. All other temporary employees are provided

only with all statutory benefits as per the Basic Conditions of

Employment Act.

Our tailored recognition programme (e-Wards) shows our

appreciation for staff who go the extra mile to serve our

clients, both internal and external. This platform has grown

approximately 400% year on year and remains a positive way

for staff to recognise their colleagues.

In the forthcoming financial year, we will further enhance and embed our employee value proposition and research, benchmark and implement a business needs-based retention strategy to enhance our retention and recognition platforms, and engage with our staff. We will also participate in the 2015 Best Employer survey to identify areas for improvement that will help us maintain and drive our “employer of choice” status. This will also enable the IDC to measure the effectiveness of its human resource practices against best practice.

Driving a change-enabled culture conducive to success

A work environment and culture that drives performance

through our people is integral to delivering our mandate. To

implement our new strategy and operating model we need to

explicitly define, embed and manage a culture with a work ethic

that supports our business operations. Since our organisational

culture currently is incongruent with changing business needs

and realities, our employees are participating in a culture values

assessment to define the desired culture. The outcome will

identify the opportunities and hurdles in achieving a culture that

is robust, flexible and change-enabled to respond effectively to

our stakeholders.

Our focus during the review period was on supporting line

managers and staff to understand and internalise the revised

IDC strategy and operating model. In the year ahead, we will

support line managers, staff and appointed dedicated change

advocates to support our change efforts so as to assist us to

execute our strategy.

Driving key behaviours

We have incorporated key behaviours in all employee

performance agreements to help embed a customer-centric

culture. The emphasis is on accountable, innovative and

solutions-focused behaviour to support our clients and

stakeholders.

Driving performance through our people

Performance management and development are key enablers

in establishing and reinforcing employee behaviours and

outputs that will help achieve our business goals and objectives.

This requires both formal and informal feedback as part of a

continuous performance management process.

A breakdown of employees who have concluded the

performance and development review process for 2015 is

reflected in the tables below.

Female employees who completed performance and development reviews: 2015*

Female (438) S band A band P band M band E band

Number of staff per band 2 161 179 93 3

Number of staff who completed performance and development reviews 100% 95% 95% 96% 100%

Male employees who completed performance and development reviews: 2015*

Male (387) S band A band P band M band E band

Number of staff per band 8 36 150 187 6

Number of staff who completed performance and development reviews 100% 86% 94% 91% 100%

* Excludes employees joining after 1 January 2015

64


Ensuring appropriate employee conduct

Managing employee conduct in a dynamic and professional

environment as a responsible employer requires firm and

decisive action. The significant increase in disciplinary matters

in the year under review is unfortunate and disappointing. In

this regard, kindly refer to page 75 for details of the misuse of

loan schemes by employees. As a result, we firmly addressed

the transgressions, and where required, improved the policies,

systems and procedures.

Managing employee conduct

Disciplinary matters 2015 2014 2013

Total number 56 14 17

During the period under review, no incidents of discrimination

were recorded. We resolved a formal grievance about employee

practices and no grievances remained unresolved from the

previous financial year. The IDC is a non-unionised environment

and therefore is not required to subscribe to any collective

recognition agreements in managing and governing the

employment relationship.

Leading and encouraging employee engagement

Employee engagement is the extent to which employees

work effectively, commit to the organisation and remain at

the Corporation as a result of that commitment. In 2011 and

2013, we launched a continuous improvement strategy that

independently measures the levels of employee engagement.

During the year under review and as part of the reprioritisation

of our business strategy, all employees had the opportunity

to participate in a comprehensive organisational diagnostic

survey to identify areas that require attention to support the

new operating model. As a result, a number of business priority

cross-functional work streams were established to effect

improvement.

We will conduct another employee engagement survey at an

appropriate time in our business to measure, monitor and track

employee engagement and the impact of the work stream

outcomes on such engagement. This initiative will further

support measuring the effectiveness of our Human Resource

practices.

Nurturing employee well-being

Providing employees, contractors and visitors to the IDC with a

safe and risk-free business environment that complies with the

Occupational Health and Safety Act, No 85 of 1993 (as amended),

is a major focus area at the IDC. More than 60 of our employees

serve on different Health and Safety committees to strengthen

and enforce compliance, conduct regular site inspections and

assist in cases of emergency. The Health and Safety committees

meet quarterly and minutes of the proceedings are recorded.

We reviewed and aligned our health and safety systems and

procedures with the requirements of the IDC Occupational

Health and Safety Policy to address potential risks and hazards.

No work-related fatalities or lost-time incidents and occupational

diseases were recorded during the past three years.

Employees also have access to wellness counselling to deal

with life’s challenges. As a responsible employer, our employee

wellness initiatives aim to educate employees about the

importance of identifying, preventing, managing and resolving

wellness matters.

ICAS Southern Africa and Discovery Health are our partners

in giving effect to our Employee Wellness Programme (EWP).

As such, employees and their immediate family members

have access to voluntary counselling as may be required. Our

employees participate in our annual Wellness Day where they

interact with healthcare professionals for a detailed lifestyle

audit to enhance their personal awareness and understanding

of health-related matters.

We also provide voluntary testing for HIV/AIDS for all employees

and annual medical screenings to encourage those over the age

of 40 to adopt a healthy and productive lifestyle and proactively

manage their health risks. Participation by eligible employees in

this initiative has grown by 3% year on year (2014: 65%).

Managing finances and planning for retirement

IDC employees have access to “retire fit” training to plan

effectively for retirement. Our wellness support partner,

ICAS, counsels and advises those preparing for retirement,

while an appointed financial adviser advises about financial

management for retirement.

65

Material matters

Staff development undertaken: 2013 to 2015

Our people continuously learn and grow 2015 2014 2013

Number of employees trained 593 702 740

Staff costs* (R million) 903 843 801

Training expenditure as a % of total staff costs 0.6 1.8 2.0

Average cost of training per employee R8 696 R21 083 R21 216

Black employees as a % of employees trained 85 81 81

% of female employees trained 55 60 51

% of employees adopting self-directed and paced e-learning 46 3 N/A

*Staff costs includes normal salaries, provident fund contributions, training and other staff and salary-related costs.

Investing in our talent to retain excellence

Formal training is the most utilised platform for continued

learning among our employees. We prioritise and deliver

needs-based training through discussions between

managers and employees to plan and record the employee’s

Personal Development Plan. During the year under review,

fewer employees participated in training programmes and

subsequently the training investment cost per employee

reduced. This is due mainly to a focus on understanding our

new strategy and identifying learning and development needs

to support the new IDC operating model in the forthcoming

financial year.

Innovating our training solutions

In our business environment, we implement innovative solutions

to encourage continuous learning through various platforms

that maximise the availability of staff to our stakeholders. During

the past year, we continued to drive participation in iLens, an

e-Learning platform aligned with international best practice.

The table below summarises our investment in staff training

during the past three financial years.

Our employees can access a significant number of other

development platforms to support continuous growth

and development. These include tertiary bursary support,

external board participation, mentoring and formal coaching,

secondment, job rotation, participation in strategic project

workgroups and external learning assignments.

We recognise and appreciate the critical contributions from all

our employees in delivering our mandate. As such, employees

benefit from needs-based training to equip them for their

existing and future roles. The tables below reflect our skills

development investment in female and male employees

segmented by band.

Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family. – Kofi Annan

66


67%

15%

10%

8%

Developing leaders to enhance engagement

All our employees contribute to driving transformation. Our

leadership development programmes support and nurture the

development of leaders and managers and their ability to share

knowledge, skills and expertise with others in the organisation.

During the review period, our employees attended various

public-based leadership programmes at the GIBS, Bain, Harvard

and WITS Business Schools and/or benefited from needs-based

executive/leadership coaching.

Continuous development of our core business activities (operational deal-making)

The 12–24 month Dealmakers Programme trains and develops

operational staff in deal-making skills, which includes evaluating

business proposals during due diligence investigations. The

programme delivers a constant supply of quality-trained

employees for our operational business units, which supports

organisational growth.

African (395)

Coloured (57)

Indian (50)

White (88)

Progress with the Dealmakers Programme: 2013 to 2015

Dealmakers Programme 2015 2014 2013

Business analysts at start of year 18 24 24

Business analysts that joined the programme 13 7 11

Candidates successful in the first stage of the programme (i.e. exited 1st discipline) 8 11 14

Business analysts that successfully completed their training in the programme 9 13 11

Business analysts who left the programme prior to completion 2 0 0

Business analysts remaining in the programme 20 18 24

Training investment for female employees: 2015

Female (325) S Band A Band P Band M Band E Band Total

Total in days 2 172 223 101 2 500

Average hours per employee in category 8 12 13 12 8 53

Training investment for male employees: 2015

Male (268) S Band A Band P Band M Band E Band Total

Total in days 6 47 181 197 0 431

Average hours per employee in category 12 10 13 13 0 48

The graphs below reflect the equity breakdown of employees

who participated in some form of training. Most of the

employees trained (81%) function at our specialist/management

and professional levels, while the rest (19%) are employed in

administrative and support positions.

Equity representation of employees who undertook training

(April 2014 to March 2015)

A critical focus area in line with the IDC’s new operating

model is enhancing our skills and capabilities to develop and

manage projects within industry sectors. Going forward, we

will continue to share and transfer this knowledge through

knowledge management practices as well as knowledge-based

communities of practice, developing and sharing lessons learnt

and harvesting knowledge from employees who leave the

organisation or retire.

67

Material matters

In line with IDC’s new operating model, a critical focus area is enhancing the skill and capabilities of managing and developing projects within industry

sectors. We will continue to share and transfer this knowledge through knowledge management practices by driving knowledge-based communities of practice, developing and sharing lessons learnt and harvesting knowledge

from employees who leave the organisation or retire.

Our customers Customer centricity

During the reporting period, our initiatives to embed a service

culture within the IDC formed part of Project Evolve, a call for us

to take the lead in industrial development.

Initiatives included the development of a customer-focused

Service Charter that sets the standards for service excellence

to ensure that clients experience the same level of service at all

our touch-points. The Charter was informed by the findings of

customer satisfaction surveys conducted among potential and

existing clients.

We also benchmarked service standards among companies

in the Financial Services and Fast Moving Consumer Goods

(FMCG) sectors considered as pioneers in service excellence to

learn from industry best practice.

In the year ahead, we will communicate internally to ensure

that employees are aware of the Service Charter, the benefits

of improved customer service and the need to respond

timeously to client requests. Early indications are that the focus

on customer-centricity has already led to an improved service

offering and enhanced customer interface.

What our customers say about us

We regularly conduct customer satisfaction surveys to measure

service performance, identify service issues and test customer

perceptions, needs and expectations.

Short-term customer satisfaction survey

The results from the 794 respondents who participated in the

short-term customer satisfaction surveys during the period

under review are reflected in the survey findings below.

68


Regional breakdown

4%

7%

42%

14%

8%

4%

4%

2%

13%

REST OF AFRICA: 2%

Very satisfied

Customer satisfaction with service delivery

53%20%

15%

5%

7%

Somewhat satisfied

Neutral

Very dissatisfied

Somewhat dissatisfied

Customer willingness to recommend the IDC

72%

11%

7%3%

7%

Very likely

Somewhat likely

Neutral

Somewhat unlikely

Very unlikely

More than 80% of respondents are willing to recommend

the IDC to business partners and associates. Respondents

whose applications were declined indicated that they would

recommend us as they were advised timeously of the reasons

for our decision. This indicates that quick feedback remains a

key driver of satisfaction.

Opportunities for improvement in IDC service delivery

24%

22%

15%

11%

25%

Turnaround time

Communication

Information requirement

Staff knowledge/experience

Happy, no comment

We have taken note of the opportunities for improvement,

which include improving turnaround times and communication,

creating a simplified funding application process and ensuring

that we have knowledgeable staff members.

Of significance is that the majority of respondents (73%) are

satisfied with our service offering.

69

Material matters

Annual customer satisfaction study

Participants: 205 clients

The aim of these surveys is to determine the customer satisfaction as a measure of the IDC’s ability to retain customers.

Key findings

?

Areas of strengths included staff professionalism, meeting

clients’ needs, product range, ethical and credible dealings,

relevant solutions and accurate information, as well as product

offerings.

Areas for improvement included a simplified application

process, easy-to-understand legal terms and conditions,

suitable product pricing and timeous responses to queries, as

well as providing clients with updates/feedback and treating

them as business partners.

Participants: 500 stakeholders

Key findings

Areas of strengths included professionalism, advice,

effectiveness, staff expertise, SME support and alignment with

government initiatives. Most respondents indicated a strong

likelihood of recommending the IDC to others.

Areas of concern included slow turnaround times, insufficient

visibility in the region, a lack of knowledge about market trends,

inflexibility and an unfriendly approval process, including the

information requirements.

Please refer to Section 5 online for CRM’s future plans.

Regional stakeholder survey

IDC partnerships with government and public sector entitiesArea of assistance/collabora-tion

Types of assistance provided and/or forms of collaboration

Public sector entities Objectives

Policy and/or strategy formulation

• Assist national government departments to formulate policies and/or strategies in several areas, such as industrial policy and action plans

• Participate in steering committees and task teams through various means, such as feasibility studies, research support and data provision and analysis

EDD, the dti, DAFF, DoE, DoT, DWCPD, MinMec, provincial governments

Improve the enabling environment for business development

• Align the IDC with national policies and strategies

• Enhance the developmental impact of public sector interventions, including the IDC

• Improve policy coordination, monitoring and evaluation

• Increase investment activity locally and in the rest of Africa

Government and public sector entities

The IDC partners with government and public sector entities

to give effect to its development mandate, assist the respective

entities in their areas of operation and contribute to achieving

economic and social development objectives. The Corporation’s

assistance to and collaboration with the public sector and

government are outlined in the table below.

?

70


Area of assistance/collabora-tion

Types of assistance provided and/or forms of collaboration

Public sector entities Objectives

Nationalinitiatives

• Identify industrial capacity development opportunities associated with national initiatives (such as localisation opportunities across the various SIPs) and the capital expenditure programmes of state-owned companies (such as Eskom and Transnet)

• Coordinate infrastructural and industrial development aspects of specific national initiatives (SIP-5 and SIP-8, among others)

• Co-fund specific national programmes and enhance their developmental impact, including localisation (such as REIPPP)

• Evaluate and prioritise community stakeholder-owned projects

• Monitor the impact of specific public sector-backed programmes and initiatives (such as CTCP)

PICC, EDD, DoE, the dti, DWCPD, NT, Eskom, Transnet

Improve the enabling environment for business development

• Improve business access to finance at favourable rates

• Improve coordination of service offerings among funding agencies

• Enhance SA’s export performance in global markets and strengthen its position in international negotiations

• Build capacity and develop skills in the public sector

• Enhance public sector delivery and efficiency

Regionaldevelop-ment

• Assist with project development initiatives and related development funding

• Identify bottlenecks in implementing projects for government to address

National, provincial and local governments

Fundmanage-ment

• Manage specific support/incentive schemes (such as CTCP, APCF and others)

• Administer funds aimed at conducting industrial policy research, enhance technical expertise in policy formulation (for instance IPSF) and support sector- or issue-specific research initiatives (such as the research grant component of APCF)

EDD, the dti

Develop-mentfundingcollabora-tion

• Create funding partnerships to enhance the development benefits of interventions of state-owned companies, aligned with their respective mandates

• Provide credit lines to other development finance institutions

PIC, UIF, DFIs

Develop-mentfundingmonitoring

• Provide information and data about the funding activities of the IDC and its subsidiary, sefa

• Report on the IDC’s operational performance

EDD, the dti, parliamentary committees, provincial governments

Research andanalysis support

• Provide economic and industry-specific information, data, research and analysis

• Analyse SA’s trade performance for trade negotiation purposes

Presidency, EDD, the dti

Capacity building

• Build and provide capacity to local governments and development agencies to enhance local economic development

• Operationally manage and participate in programmes to build capacity among policy-makers and other beneficiaries locally and elsewhere in Africa (such as APORDE, PAC-BP)

• Provide technical assistance in various areas to other development finance institutions

• Deliver regular presentations at public sector forums on economic trends and topical issues (such as DIRCO)

Local government, the dti, DIRCO, DFIs

71

Material matters

Corporate Social Investment

The IDC’s Corporate Social Investment (CSI) programme supports

the Corporation’s core mandate of developing, broadening and

deepening the country’s industrial capacity. Our approach

is developmental, investing in long-term projects instead of

once-off philanthropic donations in order to be aligned to

the country’s developmental agenda of poverty alleviation,

employment creation and transformation. We proactively

identify initiatives in support of the most marginalised members

of society. Collaboration and partnerships are key principles in

our interventions as they enable us to leverage resources and

maximise impact.

The programme has a focused approach offering support

mainly in education and skills development, healthcare and

sustainable livelihoods. Other initiatives are considered on a

small scale under special and strategic projects. Employee

Volunteering and Giving is one of the key strategies through

which we implement our CSI initiatives.

Education and skills development

Through our Whole School Development Programme we

invested R21 million in the 20 secondary schools we adopted

in 2013. These schools, of which the majority are in rural areas,

benefitted from the following:

• Improved infrastructure – ten upgraded science

laboratories; the construction of seven new laboratories;

two new ablution facilities; renovation of eleven schools

and access to clean water supply have been provided to

four schools; twenty six new classrooms; and a feeding

scheme kitchen.

• Curriculum support – capacity development workshops

for 104 educators to improve the teaching of maths,

science and accounting subjects.

• Career information sessions – these were held in

partnership with the Department of Social Development,

Shanduka, South African Institute of Chartered Accountants

Thuthuka Project and the Department of Health in KwaZulu-

Natal. A total of 3 219 learners were reached empowering

them with much-needed information to access post-matric

opportunities. Twenty one learners were awarded the IDC

bursary and are studying at various universities in South

Africa.

• Keeping the girl child in school – this project which was

launched in 2013 by IDC women, is aimed at ensuring that

poor girls do not miss school because they cannot afford

sanitary towels. The towels were distributed to over 11 000

girls.

CSI for higher education included:

• Technical Vocational Education and Training (TVET)

Colleges Support – we provided capacity to the Northern

Cape TVET College to deliver “green skills-related training”

preparing students for employment within the green sector.

The programme has allowed for curriculum development

by adding complimentary solar installation material to

their plumbing course. Two lecturers were identified to

offer the training based on their experience. In addition, 10

students were identified for training and work integrated

learning with a renewable energy company.

• University Support Programme – we continued to

support the Extended Curriculum Programme at the

University of the Western Cape (UWC) which targets

under-prepared students from poor families who attended

disadvantaged schools, and helps them reach a standard

that will allow them to complete their degrees. Our support

contributes towards strengthening UWC’s position as one

of the leading higher education institutions aiming to

increase the number of black science graduates in South

Africa.

IDC Gallery – four quarterly exhibitions took place, giving

exposure to 24 artists consisting of mainly young people. The

gallery creates a platform for emerging young artists from

historically disadvantaged backgrounds to showcase their work.

Special projects

Highlights

72


Budget performance

A total of R40 million was spent on CSI in 2015, representing an

increase of 10% from the previous year. This amount included

commitments of R7.7 million carried over from the previous year

(2013–14). Most of the expenditure went towards education

and skills development, which was our main focus last year. The

figure below illustrates the percentage expenditure by focus

area.

Within the education and skills development focus area, the

Adopt-a-School project received a significant share of the

budget (77%) followed by university initiatives (14%) and TVET

Colleges (5%).

83%

5%2%1%

9%

Education and skills

Sustainable livelihood

Special projects

Health

Employee volunteering

Expenditure by focus area

R40 million503 employees participated in five initiatives and contributed

a total amount of R3.4 million. This allowed the IDC to partner

with 29 organisations which benefited their communities

nationally.

Employee volunteering and giving

73

Material matters


Board structureBoard Investment

Committee

Consider transactions mandated to it

by the Board and reviews related party

transactions

Board Human Capital and Nominations

Committee

Develops compensation policies, plans and performance goals

Board Audit Committee

Monitors the adequacy of financial controls and

reporting

Board Risk and Sustainability

Committee

Governs risk and ensures responsible

stewardship of sustainability

Governance and Ethics Committee

Promotes the ideals of corporate fairness and transparency, assists the Board in vetting

funding applications, projects and any matter

in which a director of the IDC has an interest

IDC BOARDResponsible for the performance of the Corporation while retaining full and effective control

Executive structureSpecial Credit Committee

Considers and reviews transactions where the IDC’s transaction exposure is R25 million and more but less than R250 million and the

counterparty exposure is below R1 billion

Credit Committee

Considers and reviews transactions where the IDC’s exposure is less than R25 million and the counterparty exposure is below R250 million

EXCO Policy

Reviews and approves policies pertaining to the function of the Corporation

IDC EXECUTIVE COMMITTEESupports the Chief Executive Officer in managing the operations of the Corporation

The IDC Act, No 22 of 1940, mandates the IDC – as one of its main objectives

– to enhance corporate governance and achieve business excellence. The IDC’s business conduct stems from our commitment to ethical behaviour and sound corporate

governance within the Corporation and on the boards of the companies

in which we invest.

Ethical business practice provides assurance of the highest legal and moral standards and builds trust

among employees, associates and suppliers.

74


Changes to the Board

All the directors of the IDC Board retired at our annual

general meeting on 29 January 2015. Nine Board members

were reappointed, namely Ms BA Mabuza, Mr MG Qhena,

Mr RM Godsell, Dr SM Magwentshu-Rensburg, Ms LI Bethlehem,

Mr BA Dames, Mr ZJ Vavi, Ms PM Mthethwa and Mr NE Zalk.

Three new Board members were appointed, namely

Mr B Molefe, Transnet Chief Executive Officer (CEO),

Ms ND Orleyn, Chairperson of BP South Africa and previously

a Deputy Governor at the South African Reserve Bank, and

Ms NP Mnxasana, who serves on the boards of the Land Bank,

Nedbank, Johannesburg Securities Exchange and other entities.

The Minister of Economic Development announced the

appointment of Ms BA Mabuza to replace Ms MW Hlahla as

the Chairperson of the IDC Board and the reappointment of

Mr MG Qhena as IDC CEO for a period of five years. He thanked

Ms MW Hlahla for her exceptional leadership as Board

Chairperson during the past six years and paid tribute to

Mr JA Copelyn, Mr S Mapetla and Mr R Pitot, who retired as

Board members, for their contributions. He also thanked

Ms LL Dhlamini who stepped down in August 2014.

Board meetings and meeting attendance

The IDC Board meets at least once every quarter and holds a

strategy session at least once a year. Special Board meetings are

convened when necessary. Our Board members attended the

following meetings during the reporting period:

Dir

ecto

r

6 M

ay 2

014

26 Ju

n 20

14

16 Ju

l 201

4 (W

orks

hop)

29 Ju

l 201

4 (S

peci

al)

12 A

ug 2

014

26 A

ug 2

014

20 S

ep 2

014

(Wor

ksho

p)

16 to

18

Oct

201

4 (S

trat

egy

sess

ion)

25 N

ov 2

014

29 Ja

n 20

15

(Spe

cial

)

25 F

eb 2

015

31 M

ar 2

015

Gen

der

Popu

lati

on g

roup Age group

30 to 50 50 +

BA Mabuza* ü ü ü • ü ü ü ü ü ü ü ü F A ü

MW Hlahla** ü ü ü ü ü • ü ü ü ü F A ü

LI Bethlehem ü ü ü ü ü ü • ü ü ü ü • F W ü

JA Copelyn • ü • ü ü ü • ü • ü M W ü

BA Dames ü ü • • ü ü ü ü ü ü ü ü M C ü

LL Dhlamini ü ü • ü • • F A ü

RM Godsell • ü ü • ü • ü ü ü • ü M W ü

SM Magwentshu-Rensburg

ü ü ü • • ü • ü ü ü ü ü F A ü

SK Mapetla ü ü ü ü ü • ü ü ü ü M A ü

NP Mnxasana ü • F A ü

B Molefe ü • M A ü

PM Mthethwa ü ü ü • ü ü • ü ü • ü ü F A ü

ND Orleyn ü ü F A ü

LR Pitot ü ü ü • ü ü ü ü ü ü M W ü

MG Qhena ü ü ü ü ü ü ü ü ü ü ü ü M A ü

ZJ Vavi ü ü • • • ü ü ü ü • ü • M A ü

NE Zalk*** ü • ü • ü ü ü ü ü • • • M W ü

ü Present • Apology * Chairperson from 29 January 2015 ** Chairperson before 29 January 2015 *** Mr Zalk was on sabbatical leave for the last three meetings during the reporting period M Male F Female A African W White C Coloured

Information about the IDC Board Committees, the Executive Committee and members’ meeting attendances can be found in

Section 5 online.

75

Material matters

Governance risksThe following three of the IDC’s fourteen key risks are directly

related to corporate governance:

• Ethical conduct and behaviour

• Subsidiary delivery and performance risk

• Legal and regulatory compliance

These three risks are discussed below with reference to

examples of cases experienced during the past financial year.

Full particulars of the IDC’s 14 key risks, which were

identified at our annual risk assessment workshop in

October 2014, are provided on page 12 in Section 5 online.

Risk: Ethical conduct and behaviourEthical conduct and behaviour is seen as a risk when unethical

business practices and behaviour result in theft or fraudulent

activities. The risk applies to the IDC’s internal and external

business environments, respectively employees within the

Corporation and investee companies.

This is regarded as a top risk because it could cause financial loss

and reputational damage to the IDC. The risk is mitigated by,

inter alia, fraud and ethics awareness training and the activities

of the Governance and Ethics Committee.

Code of ethics and business conduct Our Code of Ethics is endorsed by the IDC Board and has

been communicated to all internal and external stakeholders.

Employees, particularly, must know and comply with the

Code and what is expected of them. The Code determines, for

example, that employees may not pursue personal interests or

those of relatives in any way. Breaches of the Code are taken

seriously and could lead to disciplinary action.

The Code guides the implementation of business principles,

policies and behaviour. Employees can use our online declaration

system to declare conflicts of interest and gifts received.

The interest and gifts registers are monitored continuously.

Information about gifts received is available in Section

5 online.

We used industrial theatre in December 2014 to encourage

employees to make the “right decisions” and expose corruption,

fraud or bribery. Our Corporate Secretariat tested employees’

views about the meaning and context of ethics and how the

organisation should respond to transgressions. The intervention

was well received and rated by employees as educational,

thought-provoking and easy to understand.

By embracing the Code, we live our values in striving to achieve

our vision to be “the primary driving force of commercially

sustainable industrial development and innovation to the

benefit of South Africa and the rest of the African continent”.

Abuse of staff loans by employeesNotwithstanding fraud and ethics awareness training and our

efforts in communicating the Code of Ethics to all stakeholders,

our system of internal controls and procedures uncovered a

fraudulent scheme in which some employees submitted false

claims against the IDC’s housing loan scheme, computer loan

scheme, and solar heating and subsidy scheme.

Disciplinary hearings were instituted against all employees

who submitted false claims in this matter and appropriate

sanctions, relative to the circumstances and merits of each

case, were imposed on those found guilty of misconduct. The

sanctions ranged from dismissal, final written warnings and

written warnings. In addition, individuals who were found

guilty and not dismissed were required to undergo financial

fitness training, fraud, corruption and code of ethics training

and were not eligible to participate in the annual salary review

and incentive scheme for 2015.

Misuse of funds Litigation against clients who misuse IDC funding is on

the increase. The practice of corporate governance by the

Boards of such clients often leaves much to be desired. In

many cases, a company’s executive management withholds

important information from the IDC and Non-Executive

Directors nominated to its board, sometimes with disastrous

consequences. It has been found that one of the most commonly

used methods to obtain benefits in a fraudulent manner, is the

use of related party transactions. An example is provided in the

case study on page 77.

76


A number of measures have been introduced to deal with this

problem. Our standard funding agreements, for example, have

been amended to incorporate provisions to encourage clients

to practice responsible governance. Another example is the

work undertaken by our Internal Audit Department, referred to

below.

Internal audit

Our Internal Audit Department’s Forensic Audit team investigates

fraud, corruption and related irregular behaviour, reports

transgressions to management and makes recommendations to

the EXCO and Board Audit Committee.

During the reporting period, Internal Audit investigated at least

83 (2014: 64) cases through internal audit reviews and forensic

investigations. Based on the results, it was concluded that our

control environment is adequate and operating effectively, with

the exception of our external fraud risk controls and particularly

the misappropriation of funds we advance to clients.

Bold steps have been taken to strengthen the control environment,

mainly through enhanced diligence during the due diligence

investigation and post-investment management stages, and

to review activities to mitigate external fraud risk. Information

regarding risks managed by the Internal Audit

Department is available in Section 5 online.

Our increased efforts during the review period to train employees

in fraud and corruption prevention have made them more vigilant

and diligent in reporting transgressions.

We introduced new training methods and awareness creation

materials with a focus on making clients and stakeholders aware of

the impact of fraud and corruption.

Despite our well-communicated zero-tolerance approach to fraud

and corruption, some clients continue to test our preventative

controls to seek irregular gains.

Risk: Subsidiary delivery and performance risk Effective subsidiary delivery and performance was identified

as a top risk during our annual Risk Assessment workshop.

Unmitigated, this risk could result in financial loss for the IDC.

The risk is mitigated by, inter alia, appointing directors to

investee companies and using our Post-Investment Monitoring

Department to monitor performance of these companies.

Nomination of directors

The IDC nominates professionally qualified employees to the

boards of companies in which we have a major investment.

These directors are critical to ensuring that we achieve our

investment objectives in strategic industries.

The right to nominate and appoint directors to the relevant

investee company boards is contained in the loan covenants

and shareholders’ agreements entered into between the IDC and

some of its clients. Our rationale for the nominations is twofold:

firstly to exercise oversight over our investment by enabling

well-trained, competent, high-calibre people to help embed

sound corporate governance in a business environment; and

secondly, to provide our nominee directors with opportunities

and Board experience. In this way, the IDC contributes to the

development of directors for the benefit of South Africa as a

whole.

An identified shortcoming in our director nominations process

has been insufficient IDC support to nominee directors. This has

been due, partly, to the fact that as a shareholder and lender, the

IDC is occasionally perceived as an entity with vested interests

that would not necessarily consider the best interests of the

investee company or its shareholders but rather look after its

own interests first.

This perception is without substance, as our nominee directors

do not take instructions from the IDC. They are expected to

act in the best interests of the companies on whose Boards

they serve and comply with their fiduciary duties at all times.

This perception, coupled with the non-disclosure of relevant

information by the executive management of investee

companies referred to on page 75, sometimes meant that our

nominee directors were the last to find out about important

operational and strategic developments in those companies.

We believe that the risk of loss through fraud could, in many

instances, have been mitigated or completely avoided had

our communication with investee company boards and our

nominee directors been better.

We therefore undertook a number of important initiatives

to improve communication with our nominee directors

and provide them with a support structure that promotes

independent decision-making in the best interests of the

companies on whose boards they serve.

77

Material matters

An Internal Audit investigation into the activities of a client in respect of whom the IDC’s exposure was in excess of R84 million revealed the existence of a related party (a freight company) with the same majority shareholder as that of the client. The majority shareholder of the client was the managing director of both the client and the related party. No disclosure had been made to the IDC as to the existence, nature and extent of the relationship between the entities.

The client, a manufacturing concern, had entered into an agreement with the related party to provide it with freight services. The freight company’s existence and sustainability was totally dependent on the manufacturing company as the latter was its only customer. The managing director was paid a salary by each of the two entities. Although the freight company provided its services at market-related prices, its expenses such as fuel costs and drivers’ salaries were borne by the manufacturing company. This arrangement was clearly not within industry norms and was the result of the managing director’s vested interests in the related freight company. The manufacturing company had made a loan of R1 million to the freight company. This, in addition to the fact that the manufacturing company was paying the freight company’s expenses, placed huge constraints on the manufacturing company’s cash-flow. The manufacturing company could not manufacture its product at sustainable levels and defaulted on its payments to the freight company. This caused the freight company to default on its payments to the financial institution which financed its trucks. The financial institution repossessed the trucks and held the manufacturing company, which had stood surety for the freight company, liable for payment of the shortfall.

The reason for the manufacturing company’s inability to manufacture its product at sustainable levels was the fact that it had used part of the funding that was provided by the IDC for the purchase of certain equipment, to purchase equipment which was of a lower specification and reduced capacity, at lesser cost. The unused balance of more than R1 million, which had been obtained from the IDC in a fraudulent manner, was credited to the account of the majority shareholder. The behaviour of the majority shareholder, which was obviously unethical and fraudulent, caused the failure of the manufacturing company.

Conflicts of interest arising from related party transactions are a common feature of companies that fail as a result of poor corporate governance and unethical behaviour. The IDC has since instituted legal proceedings against the client.

Case studyThe remedial initiatives include a revised Corporate Governance

Framework for investee companies to replace the first draft

which was adopted in the 2013 financial year, as well as our

first comprehensive Director Nominations Policy, both of which

were approved by the IDC Board in November 2014.

The revised Corporate Governance Framework improves the

way that we deal with our investee companies by:

• Recognising that the IDC takes on higher levels of risk due

to its unique role as development financier

• Providing investee companies with sound corporate

governance principles and processes

• Ensuring accountability, facilitating the flow of information

between the IDC and investee companies and reducing

potential exposure to investment and reputational risks

• Establishing a Centre for Corporate Governance

Particulars of the Centre for Corporate Governance

are provided in Section 5 online.

Director nominations policy for investee companiesThe IDC Director Nominations Policy for Investee Companies is central to the way we deal with our investee companies and nominee directors. Highlights of the policy include:

• A panel of professional directors consisting of IDC employees and external nominations

• A governance approach that takes into account the risk profile and specific circumstances of each individual company

• Guidelines for IDC interaction with investee company boards and nominee directors

• Guidelines to address real or perceived conflicts of interest for nominee directors and their oversight role

Implementation of the Corporate Governance Framework and Director Nominations Policy commenced during the reporting period. Currently, we are training nominee directors on the principles set out in the policy and providing them with refresher courses in corporate governance.

Subsidiary supportWe support our subsidiaries in a number of ways, from shared services to the secondment of skilled employees.

Our subsidiary sefa has an important impact on small business development and our support helps to maximise its growth through the optimal application of its resources.

78


The areas in which we contributed to sefa’s success include:

• Seconding experienced employees to assist with post-investment monitoring, often for extended periods, to ensure that funds are timeously and correctly released for the benefit of small, medium and micro enterprises

• Seconding a senior legal manager to establish relevant systems and processes to enhance sefa’s legal capacity and ensure the desired levels of accuracy in drafting legal agreements

• Seconding an experienced internal auditor to help establish appropriate standards and related disciplines

• Seconding a dedicated person to assist with corporate strategy, business planning, performance monitoring and reporting, stakeholder interventions and guidance on business development initiatives

• Supporting sefa in several other areas on an ad hoc basis, such as with information technology, financial management, risk management, procurement, asset evaluations and human capital management

• Assisting sefa’s regional offices with appropriate transaction referrals, complementing sefa offerings and collaborating in some business development initiatives

Risk: Legal and regulatory compliance

The risk of the IDC not meeting its legal and regulatory

requirements across various industries and countries of

operation is regarded as material and a potential source of

litigation. Key controls in place to mitigate this risk include

the systems and procedures employed by the Legal and

International Finance Department and those set out in our

Compliance Manual and Policies.

The IDC is subject to various pieces of legislation in conducting

its business operations. We remain committed to the letter and

spirit of the law. Our compliance philosophy recognises the

importance of ensuring continual adherence to the regulatory

requirements as a critical part of effective regulatory compliance

risk management. We ensure that our business activities comply

with all the relevant regulatory requirements applicable to the

Corporation. Some of the important pieces of legislation that

influences IDC’s business activities include the Public Finance

Management Act, IDC Act, Financial Intelligence Centre Act,

Promotion of Access to Information Act and others.

The Corporation recognises its accountability to its clients and is

committed to protecting the confidentiality of their information

as required by relevant applicable regulatory requirements.

Whilst the IDC Board remains ultimately responsible for

ensuring that we comply with regulatory requirements, the

Compliance Function assists the IDC Board in mitigating the risk

of non-compliance with regulatory requirements and assists

business units/departments with identifying regulatory risks,

developing compliance risk management plans and monitoring

compliance within the IDC.

In the financial year under review, the Compliance Function has

ensured that regulatory compliance risks associated with the

IDC’s business activities were identified, assessed, challenged

and reported. There were no contraventions, penalties,

sanctions or fines imposed on the IDC due to non-compliance

with regulatory requirements.

During the last quarter of the year under review we embarked

on a new journey, to position the IDC as a leader in industrial

development through the Project Evolve initiative. As a result,

we established a new Compliance and Regulatory Affairs

Department to ensure that we conduct business activities

proactively and effectively. We will provide a report on progress

made in this regard in our 2016 Integrated Report.

Additional governance-related information is

available in Section 5 online.

79

Material matters

Impact on financial sustainability

16.7%Impairments as % of book at cost (reduced from 18.2%)

R22 BILLIONDecrease in fair value of financial assets

R966 MILLIONProfit from equity accounted investments

R10 MILLIONIncrease in profit for the year

2%Decrease in revenue for 2015


80


IDC is self-sustaining through:• Internal profits

• Divestment of mature

investments

• Borrowing in the domestic and

international markets

Remains financially independent

IDC Funding Model • Borrowings

• Retained earnings

Loan funding

Interest payments

Capital payments

Dividend payments

Capital growth

Equity funding

The IDC is a going concern. Due to the current state of the

economy, we expect profitability to be under pressure in

the short to medium term. Our efforts to ensure sustainable

development in the South African economy require that the

Corporation remains financially sustainable.

We have sufficient liquidity to meet our current obligations

and are confident that, for the foreseeable future, we can raise

enough funding through a combination of new debt and

internally generated funds (profits, repayments on existing

facilities or equity divestments) to invest in new advances in the

economy.

Managing impairments is key to ensuring our financial

sustainability. We will continue to implement initiatives to

ensure that impairments remain within acceptable levels.

The Board has emphasised that implementing the 2016–2018

corporate plan and all the approved initiatives to continue our

operations, we need to remain a going concern and financially

sustainable.

As a result, the IDC regards financial sustainability as a material

issue.

Refer to Section 5 online for a summary of the IDC’s

key risks.

Supported by:Risk Management

Asset and liability managementForecasting and scenario analysis

81

Material matters

Five-year financial overview – extract from the Group’s annual financial statements

Figures in Rand million 2015 2014 2013 2012 2011

Statement of financial positionCash and cash equivalents* 8 257 7 877 9 009 7 825 5 828

Loans and advances 22 412 20 818 18 666 15 978 12 053

Investments 73 114 92 337 84 116 80 231 81 971

Property, plant and equipment 9 921 9 012 7 913 4 772 4 587

Other assets 8 585 8 549 7 181 3 424 2 367

Total assets 122 289 138 593 126 885 112 230 106 806

Capital and reserves 89 797 106 769 96 766 91 862 92 726

Non-controlling interest 125 215 174 331 342

Other financial liabilities 24 005 21 350 19 025 9 923 6 677

Other liabilities 8 362 10 259 10 920 10 114 7 061

Total equity and liabilities 122 289 138 593 126 885 112 230 106 806

Statement of comprehensive incomeOperating profit 1 011 2 513 2 447 3 412 2 285

Income from equity-accounted investments 656 (310) (466) (2) 633

Profit before taxation 1667 2 203 1 981 3 410 2 918

Taxation (14) (560) (3) (107) (206)

Profit for the year 1 653 1 643 1 978 3 303 2 712

* To be utilised to fund commitments of R27 645 million

Review of financial performance Revenue

Revenue for the year decreased by 2% to R19 599 million

(2014: R20 021 million). Revenue of R6 269 million from

Scaw was 3% lower than the previous financial year

(R6 452 million) due to lower demand as a result of protracted

industrial action in the mining and metal sectors.

Revenue from Foskor was up by 4% from the previous year to

R5 331 million, due mainly to the favourable impact of the Rand/

US Dollar exchange rate on selling prices. Interest income of

R2 206 million was 2% above the previous year due to an

increase in loans and advances during the year. Lower dividends

received, mainly from Kumba Iron Ore Limited on the back of

the depressed iron ore prices, decreased dividends received by

17% compared to the previous year.

Revenue: 2011 to 2015

2011

R’m

illio

n

25 000

20 000

15 000

5 000

10 000

02012 20142013 2015

2 27

1 1 318276

5 10

0

3 27

3

1 576349

5 80

1

4 12

8

1 689632

8 14

0

3 10

42

206 707

13 5

82

3 72

3

2 159545

13 5

94

Manufacturing, mining and other income

Fee income

Interest received

Dividends received

82


Operating profit

Operating profit for the year was down to R1 011 million

(2014: R2 513 million) due mainly to an increase in financing

costs as a result of increased borrowings and a decrease in

dividends, as indicated above.

Impairments for the Group decreased by R65 million, from

R1 597 million to R1 532 million, still reflecting the difficult

trading conditions persisting in the South African economy.

Financing costs increased by 37% to R1 402 million due to

increased borrowings during the year. Operating expenses

(excluding impairments) increased by 8% from R4 089 million

to R4 416 million. This was due mainly to higher distribution

costs at Foskor. We made a capital profit of R640 million from

the disposal of certain unlisted investments during the year

compared to only R1 million in the previous year.

During the 2015 financial year, we received R284 million from

the South African Government to fund sefa (2014: R231 million).

The Export Credit Insurance Corporation of South Africa Limited

(ECIC) operates an interest make-up scheme through which

compensation is made to participating lenders for interest

rate risk, liquidity risk, basis risk and credit risk assumed in the

funding of ECIC-insured export credit loans. This scheme is

implemented by the South African Government to promote the

export of South African goods and services. The IDC received

R39 million from the scheme during the past financial year

(2014: R36 million).

Operating profit: 2011 to 2015

2011

R’m

illio

n

4 000

2 000

1 500

500

1 000

02012 20142013 2015

2 28

5

3 41

2

2 44

7

2 51

3

1 01

1

2 500

3 000

3 500

Income from equity accounted investments

The equity-accounted investments showed a significant

improvement in performance during the reporting period, with

the Group’s share of profits at R656 million compared to a loss of

R310 million in 2014. This turnaround is encouraging, given the

recent protracted pressure on commodity prices.

Income/(losses) from equity accounted investments:

2011 to 2015

2011R’

mill

ion

800

-200

-400

2012 20142013

2015-2

200

400

600

0

-600

633

-466

-310

656

Loans, advances and investments

The IDC advanced R10.9 billion in new loans, advances

and investments during the year, down slightly from the

R11.1 billion in 2014. This resulted in loans and advances

growing to R22.4 billion (net of repayments) from R20.8 billion

and investments to R28.2 billion from R28.1 billion (net of

disposals and preference share redemptions).

The revaluation of investments to fair value decreased from

R64.2 billion to R44.9 billion, due mainly to the decrease in the

value of listed equities following downward trends in the oil and

iron ore prices.

83

Material matters

Loans, advances and investments: 2011 to 2015

2011

R’m

illio

n

120 000

60 000

40 000

20 000

02012 20142013 2015

80 000

100 000

12 0

53

15 9

78

18 6

66

20 8

18

22 4

12

24 9

6957

002

25 8

2254

409

28 6

0955

507

28 1

3164

206

28 2

0344

911

Revaluation of investments to fair value

Investments at cost

Loans and advances

Borrowings

The growth in our borrowings portfolio was aligned with

our strategy to fund growth in the loans and advances book

predominantly from borrowings. Borrowings for the year grew

to R24.0 billion from R21.4 billion in 2014.

During the past financial year, we continued our public

bond issuances under the IDC Domestic Medium-Term Note

programme (DMTN), with an additional issuance of R1 billion.

Similar to investor response to the inaugural issue in October

2013, this issuance was also well received, with the bond 1.7

times oversubscribed and issued over three-, five- and ten-year

maturity periods. The three- and five-year bonds are at variable

interest rates and the ten-year bond is at a fixed interest rate. The

pricing of the bond issuance reflected investors’ confidence in

the IDC’s creditworthiness. We will continue our bond issuance

programme as part of our funding sources diversification

strategy.

We continue to borrow from our traditional sources, namely

commercial banks and DFIs such as Proparco, KfW, African

Development Bank, Agence Française de Développement,

European Investment Bank and China Development Bank. The

private placement bonds we issued to the Public Investment

Corporation (PIC) for green initiatives and the Unemployment

Insurance Fund (UIF) for creating and sustaining jobs, continue

to be tapped. Cumulatively, R2 billion has been issued under the

PIC bond and R4 billion under the UIF bond.

Borrowings: 2011 to 2015

2011

R’m

illio

n

30 000

15 000

10 000

5 000

02012 20142013 2015

6 67

7

9 92

3

19 0

25

21 3

50

24 0

05

20 000

25 000

Total assets, capital and reserves and debt/equity

Total assets declined from R138.6 billion in 2014 to R122.3 billion

during the review period as a result mainly of the decrease in

the fair value of Sasol Limited (due largely to lower oil prices)

and Kumba Iron Ore Limited (due mainly to lower iron ore

prices). Our borrowings grew in line with the growth in loans

and advances. Higher debt levels and lower reserves increased

the debt/equity ratio from 20.1% in 2014 to 26.8% in 2015.

Overall, our debt activity during the year included R6.6 billion

sourced from public bonds, private placements, commercial

banks and DFIs, with repayments of R3.2 billion. We continue to

service our debt, while maintaining excellent relationships with

our lenders and investors.

84


Total assets, capital and reserves and debt/equity ratio (%):

2011 to 2015

2011

R’m

illio

n

160 000

80 000

60 000

20 000

40 000

02012 20142013 2015

92 7

26

91 8

62

96 7

66

106

769

89 7

97

100 000

120 000

140 00010

6 80

6

112

230

126

885

138

593

122

289

7,2%

10,8%

19,7%20,1%

26,8%30%

25%

20%

15%

10%

5%

0%

Total assets

Debt/Equity

Capital and reserves

Impairments (IDC company)

The impairments level increased steadily over the past five years

in value terms, from R5.4 billion in 2011 to R10.2 billion in 2015.

A 4% increase occurred in cumulative impairments between the

2014 and 2015 financial years. As a ratio of the total outstanding

financing book at cost, impairment levels decreased from 18.2%

in the previous year to 16.7% during the period under review.

The impaired level remains within the threshold of 20% as set

by the IDC Board. Impairments at market value continued on an

increasing trend to 8.8%.

Growth in IDC’s book compared to growth in impairments:

2011 to 2015

2011

R’m

illio

n

150 000

50 000

02012 20142013 2015

31 3

64

37 4

60

47 2

69

54 1

99

61 2

78

100 000

71 6

27

70 7

62 69 9

04 75 7

31

55 6

37

5.2%

20%

15%

5%

0%

Fair value adjustment Cost

10%

6.3%7.4% 7.6%

16.7%

18.2%18.2%18.2%

17.3%

8.8%

The increasing impairment levels are aligned with our risk

appetite and role in supporting high-risk sectors and businesses

largely unattractive to commercial financiers. The trend also

reflects our renewed focus on funding early-stage projects

and start-up operations. Despite the rising trend in cumulative

impairments, the impairment charge to the income statement

of R1.8 billion for the year ended 31 March 2015 was 0.6% higher

than the charge reported at financial year-end in 2014.

Key factors that contributed to the rising impairments included

the change in commodity prices and deterioration in trading

conditions. Many IDC clients experienced challenges in their

operating environments. Globally, the mining industry faced

serious challenges due to steep slide in commodity prices

and a longer than anticipated recovery period. In South Africa,

electricity shortages affected the mining and metals industries,

which reduced manufacturing production capacity and

discouraged investment in those sectors.

Prospects of recovery in the local mining and metals sectors

were hampered by protracted labour unrest and a challenging

regulatory environment. Our role as a development financier

was to stimulate business growth with new funding and

restructuring and minimise the impact of job losses on society.

We compiled a comprehensive list of impairment initiatives to

mitigate the rising trend of impairments. This was approved

by the IDC Board’s Risk and Sustainability Committee for

implementation in the 2015/16 financial year.

The IDC Executive Management Committee and the Board Risk

and Sustainability Committee receive reports every quarter on

impairments and credit risk measures.

Capital at risk (IDC company)

Capital at risk is defined as total capital outstanding (excluding

commitments) for facilities with repayment arrears of over

60 days. Capital at risk for the year ended 31 March 2015 was

R5.8 billion compared to R4.9 billion in March 2014. Despite the

increase in capital at risk in absolute terms, as a percentage of

the IDC’s loan book at cost, it remained constant at 23% due to

growth in the IDC’s loan book.

Impairments as a % of market value

Impairments as a % of costs

85

Material matters

Capital at risk: 2011 to 2015

2011

R’m

illio

n

7 000

4 000

3 000

2 000

02012 20142013 2015

5 000

6 000

1 000

As at 31 March 2015, approximately R1 billion of the total capital

at risk was attributable to the Metals and Machinery SBU, due

indirectly to the instability in the mining industry and the slow

recovery of the automotive industry.

Non-performing loans (IDC company)

Non-performing loans provide insight into the ageing of

the arrears in the loan book and is defined as the capital

portion of the loan book in arrears for over 90 days. As at

31 March 2015, non-performing loans had increased to

R5.4 billion (2014: R4.7 billion), an increase of 16% over the

previous financial year. As a percentage of the loan book at cost,

the non-performing loans have remain at 22% for the last three

years.

25%

20%

15%

10%

5%

0%

Non-performing loans: 2011 to 2015

2011

R’m

illio

n

6 000

3 000

2 000

02012 20142013 2015

3 35

9

4 67

0

5 41

5

4 000

5 000

1 000

25%

20%

15%

10%

5%

0%

We are currently implementing initiatives to contain an

increase in non-performing loans. The Investment Monitoring

Committee (IMC) meets quarterly to follow up on clients in this

category and is responsible for ensuring that appropriate action

is taken timeously to protect the IDC’s interests.

Our Post-Investment Monitoring and Risk Management

departments have been mandated to increase their

participation in the post-investment monitoring cycle through

better collaboration with our operational units and the Workout

and Restructuring Department (W&R).

The IDC Impairment Policy ensures that clients in this category

are transferred to W&R to facilitate the effective restructuring of

loans in the interest of the IDC.

Write-offs (IDC company)

The IDC writes off investments only after, inter alia, viable

turnaround and restructuring options have been exhausted

fully and the exposure is regarded as unrecoverable.

During the year under review, R1.4 billion was written off

(2014: R519 million), an increase of 162% over the previous year.

The Textiles (57%) and Forestry (19%) SBUs accounted for 76% of

the write-offs. The reasons related mainly to poor management,

market penetration, as well as fraud and the mismanagement of

funds in the funded entities.

Written-off businesses have a low probability of recovery, while

in some instances we recoup already written-off amounts. The

trend in write-offs over the past five years is illustrated in the

chart below.

Write-offs: 2011 to 2015 (net of recoveries)

2011

R’m

illio

n

1 600

800

600

200

400

02012 20142013 2015

744

158

470

519

1 36

2

1 000

1 200

1 40021% 21%

22% 22% 22%

2 20

9

4 00

2

Capital at risk % of cost

3 53

0

4 98

2

5 78

3

20%

22%

24%23% 23%

2 96

4

4 33

5

Capital at risk % of cost

86


Clients at workout and restructuring (IDC company)

The primary objective of the Workout and Restructuring Department (W&R) is to minimise the risk of failure of our business partners. We proactively identify high-risk business partners who are financially distressed or unable to meet their financial commitments.

W&R applies suitable and practical commercial solutions to minimise the risk of failure, such as restructuring and turnaround. This includes business rescue interventions for clients with reasonable prospects of viability who qualify for rehabilitation. Qualifying clients, mainly with cash flow constraints, are assisted to restructure their balance sheets. Clients who need major operational interventions to become viable again are assisted with turnaround support. W&R also optimises financial recovery of IDC exposure by negotiating settlements/disposals.

Clients at Workout and Restructuring (IDC company)

2011

R’bi

llion

12

6

4

2

02012 20142013 2015

4 5 7 9 11

8

10313

303

329340

330

320

310

290

260

250

10

308

300

280

270

2010

278

Num

ber o

f clie

nts

The W&R portfolio remained flat at R10 billion as at March 31st

2015. This represented 308 clients compared to 329 in the prior

year. The W&R portfolio represented 16% of our exposure at cost

and 26% of our business partners. For the year under review, the

R10 billion W&R portfolio consisted of clients mainly in mining

(20%), metals (14%), textiles (13%), media (13%) and agro-

industries (10.7%), with the remaining balance attributable to

other SBUs. In 2015, 53 clients were transferred to W&R.

Business rescue continues to be faced with challenges including

delays in filing for business rescue, inadequate business rescue

practitioners, use of business rescue as a delay tactic and

unavailability of Post-Commencement Funding. As at 31 March

2015, we had 10 clients in business rescue.

The W&R strategy focuses mainly on turnaround, business rescue

and restructuring for clients with a reasonable prospect of being

rescued. This enhances the development of industrial capacity.

Asset and liability managementLiquidity risk

Liquidity risk refers to an inability by the Group to meet its

obligations promptly for all maturing liabilities, increase in

financing assets, including commitments and any other financial

obligations (funding liquidity risk), or do so at materially

disadvantageous terms (market liquidity risk).

Liquidity risk is governed by the Asset and Liability Management

Policy. The Asset and Liability Committee (ALCO) provides the

objective oversight and makes delegated decisions related to

liquidity risk exposures.

Sources of liquidity risk include:

• Unpredicted accelerated drawdowns on approved financing

or call-ups of guarantee obligations

• Inability to roll and/or access new funding

• Unforeseen inability to collect what is contractually due to

the Group

• Liquidity stress at subsidiaries and/or other SOEs

• A recall without due notice of on-balance sheet funds

managed by the Group on behalf of third parties

• A breach of covenant(s), resulting in the forced maturity of

borrowing(s)

• Inability to liquidate assets in a timely manner with minimal

risk of capital losses

The Corporate Treasury manages liquidity on a day-to-day basis

within Board-approved treasury limits to ensure that:

• Sufficient, readily-available liquidity to meet probable

operational cash flow requirements for a rolling three-

month period is available at all times, and

• Excess liquidity is minimised to limit the consequential drag

on profitability

• Liquidity coverage ratios aim to ensure that suitable levels of

unencumbered high-quality liquid assets are held to protect

against unexpected, yet plausible, liquidity stress events. Two

separate liquidity stresses are considered. Firstly, an acute three-

month liquidity stress that impacts strongly on both funding

and market liquidity, and secondly, a protracted twelve-month

liquidity stress with a moderate effect on both funding and

market liquidity. Approved high-quality liquid assets include

cash, near-cash, committed facilities, as well as a portion of the

283

Capital at risk No of clients

87

Material matters

Group’s listed equity investments after applying forced-sale

discounts.

Structural liquidity mismatch ratios aim to ensure adequate

medium- to long-term liquidity mismatch capacity by

maintaining a stable funding profile. This is done by restricting,

within reasonable levels, potential future borrowing

requirements as a percentage of total funding-related

liabilities. A robust funding structure reduces the likelihood of

deterioration in the Group’s liquidity position should sources of

funding be disrupted. The structural liquidity mismatch is based

on conservative cash flow profiling with the added assumption

that liquidity, in the form of high-quality liquid assets, are treated

as readily available (i.e. recognised in the first-time bucket).

Market risk

Market risk is the risk that the value of a financial position or

portfolio will decline due to adverse movements in market

rates. In respect of market risk, the Group is exposed to interest

rate risk, exchange rate risk and equity price risk. Market risk is

governed by the Asset and Liability Management Policy and

ALCO provides the objective oversight and makes delegated

decisions related to market risk exposures.

Interest rate risk

Interest rate risk is the risk that adverse changes in market

interest rates may cause a reduction in the IDC’s future net

interest income and/or economic value of its shareholders’

equity. The IDC’s interest rate risk is a function of its interest-

bearing assets and liabilities.

The primary sources of interest rate risk include:

• Repricing risk: as a result of interest-bearing assets and

liabilities that reprice within different periods. This includes

the endowment effect due to an overall quantum difference

between interest-bearing assets and liabilities

• Basis risk: as a result of the imperfect correlation between

interest rate changes (spread volatility) on interest-bearing

assets and liabilities that reprice within the same period

• Yield curve risk: as a result of unanticipated yield curve shifts

(i.e. twists and pivots)

• Optionality: as a result of embedded options in assets (i.e.

prepayment) and liabilities (i.e. early settlement), which may

be exercised based on interest rate considerations

The sensitivity to interest rate shocks and/or changes in interest-

bearing balances is measured by means of earnings and

economic value approaches. The former quantifies the impact

on net interest income over the next twelve months and latter

gauges the impact on the fair market value of assets, liabilities

and equity.

Exchange rate risk

Exchange rate risk is the risk that adverse changes in exchange

rates may cause a reduction in the IDC’s future earnings and/or

its shareholders equity.

In the normal course of business, the IDC is exposed to

exchange rate risk through its trade finance book and exposure

to investments in and outside Africa. The risk is divided into:

Translation risk, which refers to the exchange rate risk

associated with the consolidation of offshore assets and

liabilities or the financial statements of foreign subsidiaries

for financial reporting purposes.

Transaction risk, which arises where the IDC has cash flows/

transactions (i.e. a monetary asset or liability, off-balance sheet

commitment or forecasted exposure) denominated in foreign

currencies whose values are subject to unanticipated changes

in exchange rates.

Any open (unhedged) position in a particular currency gives

rise to exchange rate risk. Open positions can be short (we

need to buy foreign currency to close the position) or long (we

need to sell foreign currency to close the position) with the

net open foreign currency position referring to the sum of all

open positions (spot and forward) in a particular currency. For

purposes of hedging, net open foreign currency positions are

segmented into the following components:

• All exposures related to foreign currency denominated

lending and borrowing

• All foreign currency denominated payables in the form

of operating and capital expenditure, as well as foreign

currency denominated receivables in the form of dividends

and fees

88


Equity price risk

Equity price risk is the risk that adverse movements in equity prices may cause a reduction in the value of the Group’s investments in listed and/or unlisted equity investments and therefore includes future earnings and/or value of shareholders’ equity.

Sources of equity price risk include:

• Systematic risk or volatility in relation to the market as a whole

• Unsystematic risk or company-specific risk factors

The investment portfolio’s beta is used as an indication of systematic, non-diversifiable risk. Due to the long-term nature of the Group’s investments, unsystematic risk is managed through diversification.

Sensitivity analysis were performed on the Group’s equity portfolio to determine the possible effect on the fair value should a range of variables change, such as cash flow, earnings and net asset values. These assumptions were built into the applicable valuation models.

Our Asset and Liability Management and Risk Management

practices, together with regular scenario planning, assist

management to ensure that this objective is achieved.

Future performance

We expect 2016 to be another challenging year as a result of

a difficult set of conditions in the South African economy and

modest growth globally.

Profitability could be impacted significantly in the year ahead

due mainly to lower dividend income forecasts. Despite the

decline in total assets, our balance sheet remains strong and

we intend growing our balance sheet further during the next

five years, with advances of between R77 billion and R94 billion

in total over that period. This will be funded from borrowings

of between R69 billion and R84 billion and share sales of up to

R2 billion, with the balance funded through internally generated

funds. Gearing levels are expected to increase over the next few

years, in line with the strategy to utilise more debt funding.

Value added statement (IDC company)

Figures in Rand million 2015 2014

Value createdNet interest income 1 411 1 602

Impairment losses on loans, advances and investments (1 827 ) (1 789)

Other income from lending activities 1 055 846

Other investment income 2 668 2 760

Operating expenditure (515 ) (492)

2 792 2 927

Value allocatedBenefits to employees 903 843

Social spending in communities 150 113

To government as taxation and dividends 104 601

Taxation (including deferred tax) 54 551

Dividends to shareholders 50 50

Value reinvested in operations 1 635 1 370

Transfer to reserves (retained earnings) 1 617 1 354

Depreciation and amortisation 18 16

2 792 2 927

89

Material matters

SECTIO

N 3

Statutory and additional informationConfirmation of accuracy and fair presentation

Accounting officer’s statement of responsibility

for annual financial statements

Report of the independent auditors

Report of the board audit committee

Company secretary’s certificate

Directors’ report

909192949798

90


Confirmation of accuracy and fair presentation for the year ended 31 March 2015

Integrated report for the 2015 financial year end

I hereby acknowledge that the integrated report of the Industrial Development Corporation of South Africa Limited (the IDC) has been

submitted to the Auditor-General for auditing in terms section 55(1)(c) of the Public Finance Management Act (PFMA).

I acknowledge my responsibility for the accuracy of the accounting records and the fair presentation of the financial statements and

confirm, to the best of my knowledge, the following:

Annual financial statements

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). All amounts

and information appearing in the integrated report are consistent with the financial statements submitted to the auditors for audit

purposes.

Performance information

The performance information: Fairly reflects the operations, actual output against planned targets for performance indicators as per

the Corporate plan of the IDC for the financial year ended 31 March 2015. Has been reported on in accordance with the requirements of

the guidelines on annual reports as issued by National Treasury. A system of internal control has been designed to provide reasonable

assurance as to the integrity and reliability of performance information.

Human resource management

The human resource information contained in the respective tables in the integrated report, fairly reflects the information of the IDC

for the financial year ended 31 March 2015.

In respect of material issues

The Integrated Report is complete, accurate and free from any omission.

MG Qhena BA Mabuza

Chief Executive Officer Chairperson of the Board

30 June 2015 30 June 2015

91

Statutory and additional information

Statement of responsibility for the annual financial statements for the year ended 31 March 2015

The Accounting Authority is responsible for the preparation of the IDC’s annual financial statements and for the judgements made in

this information.

The Accounting Authority is responsible for establishing, and implementing a system of internal controls designed to provide

reasonable assurance as to the integrity and reliability of the annual financial statements.

In my opinion, the financial statements fairly reflect the operations of the IDC for the financial year ended 31 March 2015.

The external auditors are engaged to express an independent opinion on the annual financial statements of the IDC.

The IDC’s annual financial statements for the year ended 31 March 2015 have been audited by the external auditors and their report

is presented on page 92.

The annual financial statements of the IDC set out on page 104 to page 195 have been approved.

MG Qhena


30 June 2015

Accounting officer’s statement of responsibility for annual financial statements for the year ended 31 March 2015

92


Report of the independent auditors for the year ended 31 March 2015

Report on the consolidated and separate financial statements

Introduction

We have audited the consolidated and separate financial

statements of the Industrial Development Corporation of South

Africa Limited and its subsidiaries set out on pages 104 to 195,

which comprise the consolidated and separate statement of

financial position as at 31 March 2015, the consolidated and

separate statement of comprehensive income, statement of

changes in equity and statement of cash flows for the year then

ended, as well as the notes, comprising a summary of significant

accounting policies and other explanatory information.

Director’s responsibility for the financial statements

The Board of Directors, which constitutes the accounting

authority, is responsible for the preparation and fair presentation

of these consolidated and separate financial statements in

accordance with International Financial Reporting Standards, the

Industrial Development Corporation Act of South Africa and the

requirements of the Public Finance Management Act of South

Africa , and for such internal control as the directors determine is

necessary to enable the preparation of consolidated and separate

financial statements that are free from material misstatement,

whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated

and separate financial statements based on our audit. We

conducted our audit in accordance with the Public Audit Act of

South Africa, 2004 (Act No 25 of 2004) (PAA), the general notice

issued in terms thereof and International Standards on Auditing.

Those standards require that we comply with ethical requirements,

and plan and perform the audit to obtain reasonable assurance

about whether the consolidated and separate financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the consolidated and

separate financial statements. The procedures selected depend

on the auditor’s judgement, including the assessment of the

risks of material misstatement of the consolidated and separate

financial statements, whether due to fraud or error. In making

those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the

consolidated and separate financial statements in order to design

audit procedures that are appropriate in the circumstances, but

not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes evaluating

the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management,

as well as evaluating the overall presentation of the consolidated

and separate financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated and separate financial

statements present fairly, in all material respects, the financial

position of the Industrial Development Corporation of South

Africa Limited and its subsidiaries as at 31 March 2015 and its

financial performance and cash flows for the year then ended, in

accordance with International Financial Reporting Standards and

the requirements of the Public Finance Management Act.

Independent auditors report of the Industrial Development Corporation of South Africa Limited to Parliament and the Shareholder-Minister of Economic Development

93


Report on other legal and regulatory requirements]

In accordance with the PAA and the general notice issued in

terms thereof, we report the following findings on the reported

performance information against predetermined objectives for

selected objectives presented in the annual performance report,

non-compliance with legislation as well as internal control. The

objective of our tests was to identify reportable findings as

described under each subheading but not to gather evidence

to express assurance on these matters. Accordingly, we do not

express an opinion or conclusion on these matters.

Predetermined objectives

We performed procedures to obtain evidence about the

usefulness and reliability of the information in the “Predetermined

objectives report” section included in the Directors’ report as set

out on pages 98 to 101 of the financial statements, and reported

thereon to the directors. The procedures performed were limited

to the following selected objectives:

• Industry capacity development: Value of funding to

black industrialists (men, women, youth and people with

disabilities) economy on page 100

• Development impact: Jobs expected to be created/saved in

South Africa on page 100

• Development impact: Actual jobs created on page 100

• Development impact: Funding for transactions for localisation

initiatives on page 100

• Development impact: Approvals to black-empowered

businesses on page 100

• Ratio of administration costs to interest and fee income on

page 100

• Subsidiaries on page 101

SEFA Foskor SCAW

Value of funding

disbursed

Profit/(Loss) after

interest and tax

Profit/(Loss) after

interest and tax

Number of SMMEs

financed

Implementation

of corporatisation

strategy

We evaluated the reported performance information against the

overall criteria of usefulness and reliability.

We evaluated the usefulness of the reported performance

information to determine whether it was presented in accordance

with the National Treasury’s annual reporting principles and

whether the reported performance was consistent with the

planned objectives. We further performed tests to determine

whether indicators and targets were well defined, verifiable,

specific, measurable, time bound and relevant, as required by

the National Treasury’s Framework for managing programme

performance information (FMPPI).

We assessed the reliability of the reported performance

information to determine whether it was valid, accurate and

complete.

We did not identify any material findings on the usefulness

and reliability of the reported performance information for the

selected objectives.

Additional matter

Although we identified no material findings on the usefulness

and reliability of the reported performance information for the

selected objectives, we draw attention to the following matter:

• Achievement of planned targets

Refer to the information in the Director’s report on

performance information as set out on pages 100 to 101 for

information on the achievement of planned targets for the

year.

• Compliance with legislation

We performed procedures to obtain evidence that the entity

had complied with applicable legislation regarding financial

matters, financial management and other related matters.

We did not identify any instances of material non-compliance

with specific matters in key legislation, as set out in the

general notice issued in terms of the PAA.

• Internal control

We considered internal control relevant to our audit of the

financial statements and compliance with legislation. We did

not identify any significant deficiencies in internal control.

SizweNtsalubaGobodo Inc. KPMG Inc

Registered Auditor Registered Auditor

Per DH Manana Per SN Malaba

Chartered Accountant (SA) Chartered Accountant (SA)

Registered Auditor Registered Auditor

Director Director

30 June 2015 30 June 2015

SizweNtsalubaGobodo KPMG Crescent

20 Morris Street East 85 Empire Road

Woodmead Parktown

Johannesburg, 2191 Johannesburg 2193

94


Report of the Board Audit Committee for the year ended 31 March 2015

1. Background

The IDC Board Audit Committee (BAC) assists the board in fulfilling its oversight responsibilities, in particular with regard to evaluation of the adequacy and efficiency of accounting policies, internal controls and financial reporting processes. In addition, the BAC assesses the effectiveness of the Internal Auditors and the independence and effectiveness of the external auditors.

2. Responsibilities, composition and functions of the committee

The Committee’s roles and responsibilities include its statutory duties as per the Public Finance Management Act of 1999 (as amended), the requirements of King III Code of Governance, Companies Act, 2008 (as amended) and the responsibilities assigned to it by the Board.

The Committee therefore reports that it has adopted appropriate formal terms of reference as approved by the board, and is satisfied that it has discharged its responsibilities as per the Companies Act, King III and PFMA.

The Committee has carried out its functions through the attendance at Audit Committee meetings and discussions with executive management, Internal Audit and external advisers where appropriate.

The BAC consists of four members, all of whom are independent Non-Executive Directors, and its members are Ms NP Mnxasana (Chairperson), Mr RM Godsell, Dr SM Magwentshu–Rensburg and Mr B Molefe.

The Audit Committee meets at least four times per annum, with authority to convene additional meetings as circumstances require.

The invitees to committee meetings include the two executive directors, Chief Risk Officer, internal and external auditors, the Head of Financial Management as well as the Head of Information Technology, and any other executives when necessary.

To execute the key functions and discharge the responsibilities outlined in its charter the Committee, during the period under review:

• Assisted the Board of directors in its evaluation of the adequacy and efficiency of the internal control systems, accounting practices, information systems and auditing processes applied within the company in the day-to-day management of its business;

• Facilitated and promoted communication between the Board, management, the external auditors and internal audit department on matters that are the responsibility of the Committee;

• Introduced measures that, in the opinion of the Committee, may enhance the credibility and objectivity of the financial statements and reports prepared with reference to the affairs of the company (and the IDC group)

• Nominated and recommended for appointment as external auditors the company registered auditors (KPMG Inc, and SNG. KPMG have subcontracted 20% of their portion of the audit to Ngubane & Co.), who, in the opinion of the Committee, are independent of the IDC;

• Determined the fees to be paid to the external auditors and the auditors’ terms of engagement;

• Ensured that the appointment of the external auditors complied with the Companies Act and any other legislation relating to the appointment of auditors.

3. Internal control

The BAC monitored the effectiveness of the IDC’s internal controls and compliance with the Enterprise-wide Risk Management Framework (ERMF). The emphasis on risk governance is based on three lines of defence and the BAC uses the regular reports received from the three lines of defence (process owners/ department heads; Risk & Compliance departments, Management; and Internal Audit department) to evaluate the effectiveness of the internal controls. The ERMF places weight on accountability, responsibility, independence, reporting, communication and transparency, both internally and with all IDC’s key external stakeholders.

No findings have come to the attention of the Committee to indicate that any material breakdown in internal controls has occurred during the financial year under review. The Committee is of the opinion that the internal accounting controls are adequate to ensure that the financial records may be relied upon for preparing the consolidated annual financial statements, and accountability for assets and liabilities is maintained and that this

Report of the Board Audit Committee in terms of Regulations 27(1)(10)(b) and (c) of the Public Finance Management Act of 1999 (as amended) and requirements of King III Code of Governance

95


is based on sound accounting policies, supported by reasonable and prudent judgements and estimates. The BAC was further of the opinion that the internal controls of the Corporation had been effective in all material aspects throughout the year under review.

This opinion is based on the information and explanations given by management regarding various processes and initiatives aimed at improving the internal control environment and the integrity of information, discussions with Internal Audit, as well as the independent external auditors on the results of their audits.

To formulate its opinion, the Committee:

• Monitored the identification and correction of weaknesses and breakdowns of systems and internal controls

• Monitored the adequacy and reliability of management information and the efficiency of management information systems

• Reviewed quarterly, interim and final financial results and statements and reporting for proper and complete disclosure of timely, reliable and consistent information

• Evaluated on an ongoing basis the appropriateness, adequacy and efficiency of accounting policies and procedures, compliance with generally accepted accounting practice and overall accounting standards as well as any changes thereto

• Discussed and resolved any significant or unusual accounting issues

• Reviewed reports supplied by management regarding the effectiveness and efficiency of the credit-monitoring process, exposures and related impairments and adequacy of impairment provisions to discharge its obligations satisfactorily

• Reviewed and monitored all key financial performance indicators to ensure that they are appropriate and that decision-making capabilities are maintained at high levels

• Reported to the Board on the effectiveness of the company’s internal reporting controls

4. External auditors

The IDC’s external auditors are KPMG Inc, and SizweNtsalubaGobodo (SNG). KPMG have subcontracted 20% of their portion of the audit to assist with transformation objectives by offering an emerging black-owned audit firm, Ngubani & Co, an opportunity to be exposed to auditing a company the size of the IDC.

The BAC has a well-established policy on auditor’s independence and audit effectiveness. The Committee has satisfied itself that the external auditors, KPMG Inc, Ngubani & Co and SNG were independent of the company, as set out in sections 90(2)(c) and 94(8) of the Companies Act, which includes consideration of compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors.

Requisite assurance was sought and provided by the external auditors that internal governance processes within their entities support and demonstrate their claim to independence.

The Committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and audit fees for the financial year ended 31 March 2015.

The Committee:

• Approved the external auditor’s annual plan and related scope of work

• Monitored the effectiveness of the external auditors in terms of their skills, independence, execution of the audit plan, reporting and overall performance

• Considered whether the extent of reliance placed on internal audit by the external auditors was appropriate and whether there were any significant gaps between the Internal and External Audits

• The BAC had also approved the Non-audit Services Policy that specifies that the external auditors are precluded from engaging in non-audit related services

5. Financial statements

The Committee has reviewed the financial statements of the company and the IDC group and is satisfied that they comply in all material respects with International Financial Reporting Standards and the requirements of the Companies Act and PFMA. During the period under review the Committee:

• Reviewed and discussed the audited annual financial statements included in this integrated report with the external auditors, the Chief Executive and the Chief Financial Officer

• Reviewed the external auditors’ report and management’s response thereto

• Reviewed any significant adjustments resulting from external audit queries and accepted unadjusted audit differences

• Reviewed areas of significant judgements and estimates in the annual financial statements

• Received and considered reports from the Internal Auditors

6. Expertise and experience of finance function

The Committee has considered, and has satisfied itself of the overall appropriateness of the expertise and adequacy of resources of the IDC’s finance function and experience of the senior members of management responsible for the financial function.

7. Duties assigned by the board

7.1 Integrated and sustainability reporting

The BAC fulfils an oversight role regarding the company’s integrated report and the reporting process and considers the level of assurance coverage obtained from management, internal and external assurance providers in making its recommendation to the Board.

The Committee considered the company’s information as disclosed in the integrated annual report and has assessed its consistency with operational and other information known

96


to Committee members, and for consistency with the annual financial statements. The Committee discussed the information with management and has considered the conclusions of the external assurance provider. The Committee is satisfied that the sustainability information is in all material respects, reliable and consistent with the financial results. Nothing has come to the attention of the Committee to indicate any material deficiencies in this regard.

7.2 Combined assurance

The Committee is responsible for monitoring the combined assurance model detailing significant processes, line management monitoring, Internal Audit and external assurances. This model is used to assess the appropriateness of assurance over risks/ controls provided to the Board. Engagement regarding the extent to which the various assurance providers rely on each other’s work or where overlaps are unavoidable, take place continuously. A better coordination between External and Internal Audit has been achieved, however an area of improvement is considered for the next reporting year with other assurance providers such as Compliance Function and Risk Management Department.

7.3 Going concern

The Committee concurs that the adoption of the going concern assumption in the preparation of the consolidated annual financial statements is appropriate and sound. This is after the Committee reviewed a documented assessment by management of the going concern premise of the company and the IDC Group.

7.4 Governance of risk

The Board has assigned oversight of the company’s risk management function to a separate Board Risk Committee. The chairman of the BAC attends the Board Risk Committee meetings as an ex-officio member to ensure that information relevant to these Committees is shared regularly.

The Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk and information technology risks as they relate to financial reporting. The Committee is satisfied that the appropriate and effective risk management processes are in place.

7.5 Internal audit (IA)

Internal Audit (IA) forms part of the third line of defence as set out in the Enterprise-wide Risk Management Framework (ERMF) and engages with the first and second lines of defence to facilitate the escalation of key control breakdowns. More information about Internal Audit is provided in the online section of this report.

The IA department has a functional reporting line to the Committee chairperson and an operational reporting line to the CEO. The BAC, with respect to its evaluation of the adequacy and effectiveness of internal controls, receives reports from IA on quarterly basis, assesses the effectiveness of IA function, reviews and approves the IA audit plan.

The Audit Committee is responsible for ensuring that the company’s Internal Audit function is independent and has the necessary resources, standing and authority within the company to enable it to discharge its duties. The Internal Audit function’s annual audit plan was approved by the Audit Committee.

The Committee monitored and challenged, where appropriate, action taken by management with regard to adverse Internal Audit findings.

The committee has overseen a process by which Internal Audit has performed audits according to a risk-based audit plan where the effectiveness of the risk management and internal controls were evaluated. These evaluations were the main input considered by the Board in reporting on the effectiveness of internal controls. The Committee is satisfied with the independence and effectiveness of the audit function.

8. Conclusion

Having considered, analysed, reviewed and debated information provided by management, Internal Audit and External Audit, the Committee confirmed that:

• The internal controls of the group had been effective in all material aspects throughout the year under review

• These controls had ensured that the group’s assets had been safeguarded

• Proper accounting records had been maintained• Resources had been utilised efficiently• The skills, independence, audit plan, reporting and overall

performance of the external auditors were acceptable

Following our review of the financial statements for the year ended 31 March 2015, we are of the opinion that they comply with the relevant provisions of the Public Finance Management Act 1999, as amended, and International Financial Reporting Standards, and that they fairly present the results of the operations, cash flow and financial position of the Corporation.

The Board Audit Committee has complied with all the King III principles, with the inclusion of Integrated Reporting, evidenced by the Corporation’s fourth issue of its Integrated Report 2015.

The Committee is satisfied that it has complied in all material respects, with its legal, regulatory and other responsibilities.

We hereby recommend the integrated report to the Board for approval.

On behalf of the Board Audit Committee:

Ms NP Mnxasana Chairperson of the Board Audit Committee23 June 2015

97


Company Secretary’s certificate for the year ended 31 March 2015

Declaration by the Group Company Secretary

In terms of section 88(2)(e) of the Companies Act (2008) of South Africa, I certify that, to the best of my knowledge and belief, the IDC

has lodged with the Registrar of Companies for the financial year ended 31 March 2015 all such returns as are required in terms of the

Companies Act 71 of 2008, and that such returns are true, correct and up to date. In terms of section 19 of the IDC Act, No 22 of 1940,

as amended, I certify that for the financial year ended 31 March 2015, the IDC has lodged with the Minister of Economic Development

the financial statements in respect of the preceding financial year.

P Makwane

Group Company Secretary

30 June 2015

98


Directors’ report for the year ended 31 March 2015

Introduction

The Industrial Development Corporation of South Africa Limited

(IDC) was established in 1940 by an Act of Parliament. It is a

registered public corporation and a Schedule 2 listed entity

in terms of the Public Finance Management Act (PFMA), No 1

of 1999, and the related Treasury regulations. This report is

presented in accordance with the provisions of the prescribed

legislation and addresses the performance of the IDC, as well

as relevant statutory information requirements. The Board of

Directors is the Accounting Authority as prescribed in the PFMA.

Nature of business

The IDC is a state-owned development finance institution that

provides financing to entrepreneurs engaged in competitive

industries, follows normal company policies and procedures

in its operations, pays income tax at corporate rates and pays

dividends to its shareholder.

The IDC’s vision is to be the primary driving force of commercially

sustainable industrial development and innovation for the

benefit of South Africa and the rest of Africa. Its objective is to

lead industrial capacity development.

As part of its industry development activities, the IDC has equity

interests in several companies operating in other industries

throughout the economy. Although we aim to keep our

shareholding in these companies to levels below 50%, we do

in some instances gain control of these businesses for various

reasons. Details of trading subsidiaries and joint ventures are set

out in the notes to the financial statement on pages 111 to 195.

Performance management

The IDC’s performance indicators reflect the Corporation’s goals

as set out earlier in this integrated report. Measures related

to our key objective of industrial capacity development are

integrated with other indicators that measure our development

impact, financial sustainability and efficiency, stakeholder

relations, as well as the performance of important subsidiaries.

Our primary performance evaluation focus is on our financing

activities and dedicated, wholly-owned financing subsidiaries.

The performance measurement system ensures that the IDC

remains aligned with its mandated objectives. We review

performance indicators annually to account for changes in our

external and internal environments and ensure that long-term

objectives will be achieved.

Performance against indicators is measured and reported on

a quarterly basis to the IDC’s Executive and Board. Regular

activity reports and management accounts ensure that target

deviations can be detected and corrected, if necessary.

The achievement of targets represents the expected level of

performance. Performance targets are set at corporate, team

and individual levels and performance-linked remuneration is

based on the achievement of such targets.

Performance indicators

The IDC adopted a balanced approach to performance

measuring and adapted the principles of the balanced scorecard

to support its own objectives and operations. We measure

indicators in the following five areas:

• Industrial capacity development

• Development impact

• Financial sustainability and efficiency

• Customer satisfaction

• Stakeholder relations

Performance against predetermined objectives

In some areas we exceeded targets, while targets could not be

achieved in others. In this section we discuss our performance

against predetermined objectives.

External auditors review the measurement of performance

to ensure that targets are achieved according to the original

intent and that the overall performance is a fair reflection of the

Corporation’s activities during the period under review.

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Industrial capacity development

Despite lower investment activity in the economy, we

maintained high levels of funding approvals. During the

past financial year, approved funding came to R11.5 billion

(2014: R13.8 billion) and signed transaction agreements to

R10.1 billion (2014: R13 billion). We achieved these high

funding levels despite a significant reduction in funding for the

renewable energy programme, with only R348 million approved

for round 4 of the REIPPPP in 2015 compared to R13.3 billion for

rounds 1 to 3 in the 2012 to 2014 financial years. The reduced

participation in the renewable energy programme and lower

than expected funding for the mining industry contributed

to not achieving the targets for this indicator. High levels of

funding approvals in previous years, however, enabled us to

keep disbursement levels relatively high at R10.9 billion (2014:

R11.2 billion).

We included a target for funding black industrialists for the

first time in 2015. We defined a black industrialist as a black

entrepreneur who creates and owns industrial capacity, provides

long-term strategic and operational business leadership and is,

by definition, not a portfolio or purely financial investor. The

following are characteristics of a black industrialist:

• Provides strategic and operational leadership to the business

• Has a high level of ownership (>50%) and/or exercises control

over the business

• Identifies opportunities and develops business to take

advantage of these opportunities (entrepreneurial)

• Takes personal risk in the business

• Does business in manufacturing and related sectors,

particularly within the IPAP and IDC focus areas

• Makes a long-term commitment to the business and is a

medium- to long-term investor

The R2.3 billion approved and agreements signed for black

industrialists in 2015 exceeded the target of R1.5 billion.

We use project implementation milestones to measure our

progress in long-term industry interventions. Progress during

the reporting year included the introduction of competition

into the steel industry through a MoU with Chinese partners

to reduce the price of steel. Detailed feasibility studies are

underway. Progress was also made with feasibility studies

for developing community forestry projects. In the tourism

industry, a potential project to establish a large reserve was

cancelled due to negative results from environmental studies,

but a project to upgrade tourist attractions at God’s Window in

Mpumalanga is ongoing. We did not achieve the milestones for

the establishment of a multi-brand vehicle assembly plant.

We implemented most of the 2015 strategic projects, with the

exception of the Khi Solar One concentrated solar plant, where

an accident caused regrettable fatalities and delayed project

implementation.

Development impact

Job creation remains the most important development outcome

we pursue in our funding activities. Funding agreements signed

during the past financial year, will facilitate the creation or

saving of 19 731 direct jobs of which 13 830 will be created.

8 436 of these jobs are in rural areas. This is lower than the base

objective of 24 000 jobs. IDC also measures actual jobs created

and saved by its clients, including those for whom funding was

approved in previous years and where information could be

confirmed. Through this process 21 252 jobs were verified.

We exceeded the 45% target of approved funding for businesses

with at least 25% black ownership by 3%. In addition, funding for

projects that produce inputs for infrastructure or government

procurement reached R3.4 billion against a targeted R1.5 billion.

Financial sustainability and efficiency

Income for the IDC and its financing subsidiaries, which excludes

dividends from large mature-listed equity investments, was

61% higher than budgeted due to higher dividend receipts, fees

and other income. Operating expenses, excluding impairments,

were 5% lower than budgeted. As a result, the cost-to-income

ratio was more favourable than targeted.

We stabilised the value of impairments at 16.7% (2014: 18.2%)

of the portfolio. The indicative 9.4% Internal Rate of Return

(IRR) on investments for the past four years is encouraging

and was driven primarily by investments in renewable energy

and mining projects. Reserves overall declined over the past

year and increased by 2.9% on average per year over the last

five years. This was due mainly to a drop in the value of listed

shares by due to commodity prices affecting Sasol, BHP Billiton

and Kumba Iron Ore share prices. We are reviewing options to

reduce concentration risk in the IDC’s listed equity portfolio.

Customer satisfaction and stakeholder relations

The average turnaround time of non-complex transactions,

from date of due-diligence to date of sending a legal agreement

to the client improved to 14 working days against the targeted

15 days.

100


Subsidiaries

The impact of sefa on funding SMEs continued its upward

trend. During the past year, sefa disbursed R1.3 billion

(2014: R549 million) to 68 724 SMMEs and Cooperatives (2014:

46 407).

Scaw and Foskor, however, posted disappointing financial

results. Returning these companies to profitability will be a

priority in the next financial year.

The details of performance against indicators are shown in the

table below.

Targets and performance

Perspective Indicator Measurement Base TargetActual

achieved

Industrial

capacity

development

Contribution to

investment in the

economy

Value of funding approvals with

signed agreements

R14.2 billion R19.5 billion R10.1 billion

Sub-minimum: disbursements

Sub-minimum: value of funding

approvals with signed agreements for

projects in the rest of Africa

R7 billion

R1.2 billion

R10.9 billion

R2.1 billion

Value of funding to black

industrialists

Value of funding agreements signed

for transactions benefiting black

industrialists

R1 billion R1.5 billion R2.3 billion

Progress towards

achieving priority

industry development

goals

Achievement of industry

development milestones

75% achieved 90% achieved 78% achieved

Implementing projects % of pre-identified projects

implemented

70% 100% 81%

Development

impact

Jobs expected to be

created/saved in South

Africa

IDC facilitation of jobs (created/

saved), counted when agreements

were signed

24 000 31 000 19 731

Sub-minimum: jobs in rural areas

Sub-minimum: jobs expected to be

created

7 000

15 000

8 436

13 830

Actual jobs created/saved Actual number of jobs created/saved

in South Africa

20 000 25 000 21 252

Sub-minimum: actual jobs created 15 000 15 074

Approvals to black-

empowered businesses

35% 45% 48%

Funding for transactions

for localisation initiatives

Value of funding agreements signed

for infrastructure or other government

procurement transactions

R1.0 billion R1.5 billion R2.8 billion

Financial

sustainability

and

efficiency

Ratio of administration

costs to interest and fee

income

Administration cost, including

grants and donations, excluding

impairments as a % of net interest

and fee income and dividends (excl.

Sasol, Kumba Iron Ore, BHP Billiton,

ArcelorMittal and Sappi)

77% 67% 50.9%

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Perspective Indicator Measurement Base TargetActual

achieved

Financial

sustainability

and

efficiency

Level of impairments Assessment on management

interventions and implementation of

lessons learnt to reduce the level of

impairments

Qualitative rating on a scale

of 1-5

Rating: 2.3

Impairments as a % of the portfolio

(at cost)

17% 16% 16.7%

Growth in reserves Five-year average growth in reserves CPI +2% CPI +4% CPI -2.3%

Growth in value of new

equity investments

IRR for investments where IDC first

took equity in the underlying business

over the past four years

1.7% 4% 9.4%

Stakeholder

relations/

customer

satisfaction

Turnaround time on

transactions

Turnaround time on non-complex

transactions (from start of due

diligence to delivery of agreement to

client)

17 working

days

15 working

days

14.3 working

days

Subsidiaries sefa Value of funding disbursed R800 million R880 million R1 294 million

Number of SMMEs financed 37 758 41 534 68 724

Foskor Profit/(loss) after interest and tax R161 million R201 million (R415 million)

Scaw Profit/(loss) after interest and tax (R335 million) (R295 million) (R672 million)

Implementation of corporatisation

strategy

IDC-approved

complete

corporatisa-

tion study

with

recommend-

dations

Progress with

implementa-

tion of

recommenda-

tions

Rating: 2.0

Funding

IDC sources loan funding mainly from international

development agencies, commercial facilities through our

relationships with commercial banks and bond issuances.

During the 2015 financial year, we continued the public

bond issuances under the IDC Domestic Medium-Term Note

programme (DMTN), with an additional R1 billion issued during

the year. This issuance was well-received by investors with the

bond 1.7 times oversubscribed and issued over three-, five- and

ten-year maturity periods.

The general 2015 funding requirements for the IDC Mini Group

to inter alia finance advances of R10.9 billion and borrowing

redemptions of R3.2 billion amounted to R14.5 billion

(2014: R16.5 billion). These requirements were met mainly out

of R8.3 billion of internally generated funds, namely repayments

received and profits. New borrowings amounted to R6.6 billion

for the year.

Corporate governance

The IDC’s directors endorse the King III Report on Corporate

Governance and, during the review period, endeavoured to

adhere to those recommendations or explain non-adherence.

Our performance in this regard is outlined in the Corporate

Governance section of this annual report.

Public Finance Management Act

The IDC Board is responsible for the development of the

corporation’s strategic direction. Our Board-approved strategy

and business plan are captured in the Shareholder’s Compact

and Corporate Plan. Following agreement for the strategy and

business plan with the Economic Development Department,

the documents form the basis for detailed action plans and

continuous performance evaluation.

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Our business units and departments are guided by the

Shareholder’s Compact and Corporate Plan to prepare annual

business plans, budgets and capital programmes to meet their

strategic objectives.

Day-to-day management responsibility is vested in line

management through a clearly defined organisational structure

and formal delegated authority.

We have a comprehensive system of internal controls

designed to ensure that we meet corporate objectives and the

requirements of the Public Finance Management Act (PFMA),

No 1 of 1999. Processes are in place to ensure that where

controls fail, the failure is detected and corrected.

Discussions with the Economic Development Department and

National Treasury regarding certain PFMA exemptions for the

IDC and its subsidiaries, which expired during the past year,

were not concluded by the 2015 financial year-end.

Dividends

A dividend of R50 million was paid during the financial year. On

30 June 2015 the Directors declared a dividend of R50 million.

Valuation of shares

The value of the Group’s investment in listed shares decreased

to R45.0 billion at the end of the 2015 (2014: R65.3 billion)

financial year.

Review of post-balance sheet events

The post-year-end value of the Group’s listed shares increased

by R547 million as a result of movements in the listed equities

market.

Share capital

The authorised (R1.5 billion) and issued share capital

(R1.4 billion) remained unchanged during the reporting year.

Audit Committee information

The names of the Audit Committee members are reflected on

pages 16 to 19. The meetings held and attendance

record are outlined in Section 5 online.

Going concern

The Directors assessed the IDC as being a going concern in terms

of financial, operational and other indicators. The Directors are

of the view that our status as a going concern remains intact.

Directors and secretary

The current directors of the IDC, with brief biographies, are

reflected on pages 16 to 19.

The name and registered office of the Secretary appears on the

inside back cover.

103


SECTIO

N 4

Annual financial statementsStatement of financial position

Statement of comprehensive income

Statements of changes in equity

Statements of cash-flows

Segmental report – reportable segments

Segmental report – geographical segments

Notes to the financial statements

104105106108109110111

104


Statement of financial positionfor the year ended 31 March 2015

Group Company

Figures in Rand million Note(s) 2015 2014 2015 2014

Assets

Cash and cash equivalents 5 8,257 7,877 7,714 7,250

Derivative financial instruments 19 4 71 - 60

Trade and other receivables 6 3,702 3,813 1,069 906

Inventories 7 3,853 3,854 4 13

Current tax receivable 264 7 260 -

Loans and advances 8 22,412 20,818 21,760 20,298

Investments 9 57,351 78,080 35,159 46,645

Non-current assets held for sale 10 65 26 - -

Investments in subsidiaries 11 - - 43,415 49,577

Investments in associates, joint ventures and partnerships

12 15,763 14,257 15,624 12,721

Deferred tax 13 61 389 - -

Investment property 14 299 307 15 15

Property, plant and equipment 15 9,921 9,012 129 120

Biological assets 16 247 43 - -

Intangible assets 17 90 39 - -

Total Assets 122,289 138,593 125,149 137,605

Equity and Liabilities

Equity

Equity Attributable to Equity Holders of the

Group/Company

Share capital 18 1,393 1,393 1,393 1,393

Reserves 49,217 67,961 60,114 76,740

Retained income 39,187 37,415 23,353 21,736

89,797 106,769 84,860 99,869

Non-controlling interest 125 215 - -

Total Equity 89,922 106,984 84,860 99,869

Liabilities

Bank overdraft 5 44 106 - -

Derivative financial instruments 19 56 26 50 19

Trade and other payables 20 3,748 3,560 1,262 992

Current tax payable 3 48 - 42

Retirement benefit obligation 21 707 624 182 162

Other financial liabilities 22 24,005 21,350 33,566 29,017

Deferred tax 13 3,369 5,480 5,119 7,261

Provisions 23 417 391 48 67

Share-based payment liability 24 18 24 62 176

Total Liabilities 32,367 31,609 40,289 37,736

Total Equity and Liabilities 122,289 138,593 125,149 137,605

105

Annual Financial Statements

Statement of comprehensive incomefor the year ended 31 March 2015

Group CompanyFigures in Rand million Note(s) 2015 2014 2015 2014Revenue 25&26 19,599 20,021 5,476 5,690Cost of sales (12,541) (11,432) - -Gross profit 7,058 8,589 5,476 5,690Finance costs paid 27 (1,402) (1,026) (1,170) (837)Gross profit after financing costs 5,656 7,563 4,306 4,853Other income 663 635 398 352Net capital gains 29 640 1 427 1Operating expenses (5,948) (5,686) (3,413) (3,253)Operating profit 30 1,011 2,513 1,718 1,953Profits/(losses) from equity accounted investments 656 (310) 3 2Profit before taxation 1,667 2,203 1,721 1,955Taxation 32 (14) (560) (54) (551)Profit for the year 1,653 1,643 1,667 1,404

Other comprehensive income:Items that will not be reclassified to profit or loss: 590 113 14 2Profits on property, plant and equipment revaluation 780 115 17 1Remeasurements on net defined benefit liability/asset (17) 19 (10) 1Income tax relating to items that will not be reclassified (173) (21) 7 -Items that may be reclassified to profit or loss: (19,334) 8,219 (16,640) 7,604Exchange differences on translating foreign operations (3) (49) - -Available-for-sale financial assets adjustments (21,789) 7,626 (18,700) 7,146Other reserves (156) (10) - -Share of comprehensive income of associates and joint ventures 696 (322) (23) (20)Income tax relating to items that may be reclassified 1,918 974 2,083 478Other comprehensive (loss)/income for the year net of taxation 34 (18,744) 8,332 (16,626) 7,606Total comprehensive (loss)/income for the year (17,091) 9,975 (14,959) 9,010

Profit for the year attributable to :Owners of the parent 1,956 1,721 1,667 1,404Non-controlling interest (303) (78) - -

1,653 1,643 1,667 1,404Total comprehensive (loss)/income for the year attributable to:Owners of the parent (16,922) 10,053 (14,959) 9,010Non-controlling interest (169) (78) - -

(17,091) 9,975 (14,959) 9,010

106


Statement of changes in equityfor the year ended 31 March 2015

Figures in Rand million Total share

capital

Foreign currency

translation reserve

Associated entities reserve

Revaluation reserve

Common control reserve Other reserve

Share-based payment reserve

Retained income

Total attributable to equity holders of the group /

companyNoncontrolling

interest Total equity

Group Balance at 31 March 2013 1,393 510 1,561 55,507 1,657 90 304 35,744 96,766 174 96,940

Changes in equity

Total comprehensive income for the year - 384 (755) 8,699 - 4 - 1,721 10,053 (78) 9,975

Transactions with non-controlling shareholders - - - - - - - - - 119 119

Distributions to owners of the company

Dividends - - - - - - - (50) (50) - (50)

Total changes - 384 (755) 8,699 - 4 - 1,671 10,003 41 10,044

Balance at 31 March 2014 1,393 894 806 64,206 1,657 94 304 37,415 106,769 215 106,984

Changes in equity

Total comprehensive income for the year - 485 208 (19,295) - (142) - 1,822 (16,922) (169) (17,091)



Dividends - - - - - - - (50) (50) - (50)

Total changes - 485 208 (19,295) - (142) - 1,772 (16,972) (90) (17,062)

Balance at 31 March 2015 1,393 1,379 1,014 44,911 1,657 (48) 304 39,187 89,797 125 89,922

Note(s) 18 34 34 34 34 34

CompanyBalance at April 01, 2013 1,393 - 17 67,895 1,222 - - 20,382 90,909 - 90,909

Changes in equity

Total comprehensive income for the year - - (20) 7,625 - 1 - 1,404 9,010 - 9,010


Dividends - - - - - - - (50) (50) - (50)

Total changes - - (20) 7,625 - 1 - 1,354 8,960 - 8,960

Balance at April 01, 2014 1,393 - (3) 75,520 1,222 1 - 21,736 99,869 - 99,869

Changes in equity

Total comprehensive income for the year - - (23) (16,593) - (10) - 1,667 (14,959) - (14,959)


Dividends - - - - - - - (50) (50) - (50)

Total changes - - (23) (16,593) - (10) - 1,617 (15,009) - (15,009)

Balance at March 31, 2015 1,393 - (26) 58,927 1,222 (9) - 23,353 84,860 - 84,860

Note(s) 18 34 34 34 34 34

107


Figures in Rand million Total share

capital

Foreign currency

translation reserve


Revaluation reserve

Common control reserve Other reserve


Retained income

Total attributable to equity holders of the group /

companyNoncontrolling

interest Total equity

Group Balance at 31 March 2013 1,393 510 1,561 55,507 1,657 90 304 35,744 96,766 174 96,940

Changes in equity

Total comprehensive income for the year - 384 (755) 8,699 - 4 - 1,721 10,053 (78) 9,975



Dividends - - - - - - - (50) (50) - (50)

Total changes - 384 (755) 8,699 - 4 - 1,671 10,003 41 10,044

Balance at 31 March 2014 1,393 894 806 64,206 1,657 94 304 37,415 106,769 215 106,984

Changes in equity

Total comprehensive income for the year - 485 208 (19,295) - (142) - 1,822 (16,922) (169) (17,091)



Dividends - - - - - - - (50) (50) - (50)

Total changes - 485 208 (19,295) - (142) - 1,772 (16,972) (90) (17,062)

Balance at 31 March 2015 1,393 1,379 1,014 44,911 1,657 (48) 304 39,187 89,797 125 89,922

Note(s) 18 34 34 34 34 34

CompanyBalance at April 01, 2013 1,393 - 17 67,895 1,222 - - 20,382 90,909 - 90,909

Changes in equity

Total comprehensive income for the year - - (20) 7,625 - 1 - 1,404 9,010 - 9,010


Dividends - - - - - - - (50) (50) - (50)

Total changes - - (20) 7,625 - 1 - 1,354 8,960 - 8,960

Balance at April 01, 2014 1,393 - (3) 75,520 1,222 1 - 21,736 99,869 - 99,869

Changes in equity

Total comprehensive income for the year - - (23) (16,593) - (10) - 1,667 (14,959) - (14,959)


Dividends - - - - - - - (50) (50) - (50)

Total changes - - (23) (16,593) - (10) - 1,617 (15,009) - (15,009)

Balance at March 31, 2015 1,393 - (26) 58,927 1,222 (9) - 23,353 84,860 - 84,860

Note(s) 18 34 34 34 34 34

108


Statement of cash-flowsfor the year ended 31 March 2015

Group Company

Figures in Rand million Note(s) 2015 2014 2015 2014

Cash-flows from operating activities

Cash used in operations 37 (972) (1,383) (450) (700)

Interest received 2,206 2,159 2,581 2,439

Dividends received 3,104 3,723 2,238 2,757

Finance costs paid (1,310) (1,034) (1,104) (901)

Tax paid 39 (406) (605) (407) (598)

Changes in operating funds 763 (479) 2,955 653

Increase in operating assets (1,892) (2,804) (1,594) (2,709)

Increase in operating liabilities 2,655 2,325 4,549 3,362

Net cash generated from operating activities 3,385 2,381 5,813 3,650

Cash-flows from investing activities

Purchase of property, plant and equipment 15 (1,180) (1,522) (14) (15)

Proceeds on sale of property, plant and equipment 15 371 32 4 -

Purchase of investment property 14 (3) (1) - -

Proceeds on sale of investment property 14 - (1) - (1)

Sale / (purchase) of other intangible assets 17 (58) 10 - -

Business combinations 38 - 20 - -

Acquisition of investments (3,008) (2,114) (6,008) (4,410)

Purchase of biological assets 16 (27) (26) - -

Proceeds on sale of biological assets 16 9 8 - -

Proceeds on realisation of investments 1,003 33 719 33

Net cash used in investing activities (2,893) (3,561) (5,299) (4,393)

Cash-flows used in financing activities

Dividends paid (50) (50) (50) (50)

Net cash used in financing activities (50) (50) (50) (50)

Net (decrease)/increase in cash and cash equivalents 442 (1,230) 464 (793)

Cash at the beginning of the year 7,771 9,001 7,250 8,043

Total cash at end of the year 5 8,213 7,771 7,714 7,250

109


Reportable segmentsfor the year ended 31 March 2015

Industrial Development Corporation

Other financing activities

Foskor (Pty) Limited

Scaw South Africa (Pty) Ltd Other Total

Figures in Rand million 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014IncomeInterest received 2,581 2,439 501 199 30 27 1 2 (907) (508) 2,206 2,159

Dividends received 2,238 2,757 1,145 1,010 4 - - - (283) (44) 3,104 3,723

Fee income 657 494 50 51 - - - - - - 707 545

Farming, manufacturing and mining income - - - - 5,297 5,086 6,268 6,450 2,017 2,058 13,582 13,594

Revenue * 5,476 5,690 1,696 1,260 5,331 5,113 6,269 6,452 827 1,506 19,599 20,021Share of profits of equity-accounted investments 3 2 31 33 - 1 - - 1,055 953 1,089 989

Other income 398 352 10 (9) 61 178 - - 194 114 663 635

Net capital gains 427 1 - - 217 - - - (4) - 640 1

ExpensesFinancing costs (1,170) (837) (22) - (215) (178) (466) (382) 471 370 (1,402) (1,027)

Operating expenses (1,502) (1,325) (682) (289) (5,703) (4,878) (6,532) (6,120) (1,868) (2,242) (16,287) (14,854)

Share of losses of equity-accounted investments - - - - (1) - - - (432) (1,299) (433) (1,299)

Taxation (54) (551) (1) (60) 188 5 (161) 58 14 (12) (14) (560)

Depreciation (18) (16) (4) (4) (288) (270) (195) (175) (93) (69) (598) (534)

Project feasibility expenses (72) (136) - - - - - - (6) (9) (78) (145)

Net movement in impairments (1,821) (1,776) (215) (90) - - - - 510 282 (1,526) (1,584)

Profit for the year 1,667 1,404 813 841 (410) (29) (1,085) (167) 668 (406) 1,653 1,643Total assets 125,149 137,605 2,671 2,615 7,891 8,526 5,218 4,768 (18,640) (14,921) 122,289 138,593

Interest in equity-accounted investments 15,624 12,721 852 775 4 11 - - (717) 750 15,763 14,257

Total liabilities 40,289 37,736 570 1,334 4,636 4,735 8,562 9,075 (21,690) (21,271) 32,367 31,609

Capital expenditure 14 15 2 3 574 744 288 356 302 404 1,180 1,522

Capital expenditure commitments - - - - - - 660 660 (397) 46 263 706

Other financing activities – includes Findevco, Impofin, Konoil and the sefa Limited. Other – includes Dymson Nominee, Kindoc Investments, Kindoc Sandton Properties, Konbel, Prilla 2000, certain other property-owning subsidiaries and consolidation adjustments.

*All revenue is from external customers.

110


South Africa Rest of Africa Other Total

Figures in Rand million 2015 2014 2015 2014 2015 2014 2015 2014

Income

Interest received 1,826 1,815 377 337 3 7 2,206 2,159

Dividends received 3,061 3,713 24 10 19 - 3,104 3,723

Fee income 707 545 - - - - 707 545

Farming, manufacturing and mining income

13,276 13,273 33 25 273 296 13,582 13,594

Revenue 18,870 19,346 434 372 295 303 19,599 20,021

Share of profits of equity-accounted investments

910 955 179 34 - - 1,089 989

Other income 660 625 - - 3 10 663 635

Net capital gains 640 1 - - - - 640 1

Expenses

Financing expenses (1,401) (1,027) (1) - - - (1,402) (1,027)

Operating expenses (15,984) (14,521) (29) (19) (274) (314) (16,287) (14,854)

Share of losses of equity-accounted investments

(431) (915) (2) (384) - - (433) (1,299)

Taxation (19) (562) - - 5 2 (14) (560)

Depreciation (598) (529) - - - (5) (598) (534)

Net movement in impairments (1,526) (1,584) - - - - (1,526) (1,584)

Project feasibility expenses (78) (145) - - - - (78) (145)

Profit for the year 970 1,644 654 3 29 (4) 1,653 1,643

Total assets 112,644 132,617 8,556 4,886 1,089 1,090 122,289 138,593

Interest in equity-accounted investments

11,996 11,122 3,767 3,135 - - 15,763 14,257

Total liabilities 32,280 31,481 6 8 81 120 32,367 31,609

Capital expenditure 1,180 1,522 - - - - 1,180 1,522

Capital expenditure commitments 263 706 - - - - 263 706

Other – includes all countries outside the African continent.

Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic decisions. The Executive Committee considers the business primarily from a product perspective. The products are segmented into financing activities and non-financing activities.

Segment assets consist primarily of loans, advances, investments, property, plant and equipment and cash and cash equivalents.Segment liabilities comprise non-current and current liabilities.

Capital expenditure comprises additions to property, plant and equipment.

Geographical segmentsfor the year ended 31 March 2015

111


1. Accounting policies

The Industrial Development Corporation of South Africa

Limited (IDC, Company or Corporation) is domiciled in South

Africa. The consolidated financial statements for the year ended

31 March 2015 comprise the IDC, its subsidiaries and the Group’s

interest in associates and jointly controlled entities (referred to

as the Group).

The financial statements were authorised for issue by the

directors on 30 June 2015.

1.1 Statement of compliance

The separate and consolidated financial statements have been

prepared in accordance with and comply with International

Financial Reporting Standards (IFRS) and its interpretations

adopted by the International Accounting Standards Board (IASB)

as well as the requirements of the South African Companies Act

and the requirements of the Public Finance Management Act.

1.2 Basis of preparation

The separate and consolidated financial statements are

presented in South African Rand, which is the Company’s

functional currency, rounded to the nearest million.

These consolidated financial statements are prepared on the

historical cost basis, except for the following:

• Derivative financial instruments are measured at fair value

• Financial instruments held-for-trading are measured at fair

value

• Financial instruments classified as available-for-sale are

measured at fair value

• Financial instruments designated at fair value through profit

or loss are measured at fair value

• Investments in subsidiaries, associates and jointly-controlled

entities are carried at fair value in the separate financial

statements of the company

• Biological assets are measured at fair value less costs to sell

• Investment property is measured at fair value

• Land and buildings are measured at revalued amount

• Aircrafts are measured at fair value

Standards, amendments and interpretations to existing

standards not yet effective and also not early adopted:

a) IFRS 9 – Financial Instruments (Effective 1 January 2018)

IFRS 9 – Financial Instruments will replace certain key elements

of IAS 39. The two key elements that would impact the Group’s

accounting policies include:

• Classification and measurement of financial assets and

financial liabilities: the standard requires that all financial

assets be classified as either held at fair value or amortised

cost

i The amortised cost classification is only permitted

where it is held within a business model where the

underlying cash-flows are held in order to collect

contractual cash-flows and that the cash-flows arise

solely from payment of principal and interest

ii The standard further provides that gains and losses on

assets held at fair value are measured through the

income statement unless the entity has elected to

present gains and losses on non-trading equity

investments (individually elected) directly through

comprehensive income. With reference to financial

liabilities held at fair value, the standard proposes that

changes to fair value attributable to credit risk are

taken directly to other comprehensive income without

recycling

• Impairment methodology: the key change is related to a

shift from an incurred loss to an expected loss impairment

methodology

The implementation of IFRS 9 is anticipated to have a significant

impact on the preparation of the Group’s financial statements.

All other standards and interpretations issued but not yet

effective are not expected to have a material impact on

the Group.

1.3 Investments in subsidiaries

Subsidiaries are entities controlled by the IDC. The Group

‘controls’ an investee if it is exposed to, or has rights to, variable

returns from its involvement with the investee and has the

Notes to the financial statementsfor the year ended 31 March 2015

112


ability to affect those returns through its power over the

investee. The financial statements of subsidiaries are included

in the consolidated financial statements from the date on

which control commences until the date when control ceases.

Investments in subsidiaries in the Company’s separate financial

statements are carried at fair value as available-for-sale financial

assets.

i) Business combinations

The acquisition method is used to account for the acquisition of

subsidiaries by the Group. The cost of an acquisition is measured

as the fair value of the assets given, equity instruments issued

and liabilities incurred or assumed at the date of exchange.

The assets, liabilities and contingent liabilities acquired are

assessed and included in the statement of financial position at

their estimated fair value to the Group. If the cost of acquisition

is higher than the net assets acquired, any difference between

the net asset value and the cost of acquisition of a subsidiary

is treated in accordance with the Group’s accounting policy

for goodwill. If the cost of acquisition is less than the fair value

of the net assets of the subsidiary acquired, the difference is

recognised directly in profit or loss.

ii) Transactions eliminated on consolidation

Intercompany transactions, balances and unrealised gains

on transactions between Group companies are eliminated on

consolidation.

Unrealised losses are eliminated in the same way as unrealised

gains, but only to the extent that there is no evidence of

impairment.

iii) Non-controlling interests

Non-controlling interests (NCI) are measured at their

proportionate share of the acquiree’s identifiable net assets

at the acquisition date. Changes in the Group’s interest in a

subsidiary that do not result in a loss of control are accounted

for as equity transactions.

iv) Loss of control

When the Group loses control over a subsidiary, it derecognises

the assets and liabilities of the subsidiary, and any related NCI

and other components of equity. Any resulting gain or loss is

recognised in profit or loss. Any interest retained in the former

subsidiary is measured at fair value when control is lost.

1.4 Consolidated Structured entities

The Group has established a number of consolidated structured

entities (CSEs) for trading and investment purposes. CSEs are

entities that are created to accomplish narrow and well defined

objectives. A CSE is consolidated if, based on an evaluation

of the substance of the relationship with the Group and the

Group has control over the CSE. CSEs are the Group entities

which are designed so that voting rights are not relevant to the

determination of power, but instead other rights are relevant.

CSEs controlled by the Group are generally those established

under terms that impose strict limitations on the decision-

making powers of the CSEs’ management and that result in the

Group receiving the majority of the benefits related to the CSEs’

operations and net assets.

Investments in CSEs in the Company’s separate financial

statements are carried at fair value.

1.5 Investments in associates

Investments in associates are all entities over which the

Group has significant influence but not control, generally

accompanying a shareholding of between 20% and 50% of the

voting rights. Investments in associates are accounted for using

the equity method of accounting and are initially recognised

at cost. The Group’s investment in associates includes goodwill

identified on acquisition, net of any accumulated impairment

loss.

The Group’s share of its associates’ post-acquisition profits

and losses is recognised in profit or loss, and its share of post-

acquisition movements in reserves is recognised in other

comprehensive income. The cumulative post-acquisition

movements are adjusted for against the carrying amount of the

investment. When the Group’s share of losses in an associate

equals or exceeds its interest in the associate, including any

other unsecured receivables, the Group does not recognise

further losses, unless it has incurred obligations or made

payments on behalf of the associate.

Notes to the financial statements (continued)for the year ended 31 March 2015

113


Unrealised gains and losses arising from transactions with

equity-accounted investments are eliminated against the

investment to the extent of the Group’s interest in the

investment. Unrealised losses are eliminated only to the extent

that there is no evidence of impairment.

Investments in associates in the Company’s separate financial

statements are carried at fair value.

1.6 Joint ventures and partnerships

Joint ventures and partnerships are those entities over whose

activities the Group has joint control, whereby the Group has

rights to the net assets of the arrangement, rather than rights to

its assets and obligations for its liabilities.

The consolidated financial statements include the Group’s

share of the total recognised gains and losses of joint ventures

on an equity accounted basis, from the date that joint control

is established by contractual agreement commences until the

date that it ceases. When the Group’s share of losses exceeds

its interest in a joint venture, the Group’s carrying amount is

reduced to nil and recognition of further losses is discontinued

except to the extent that the Group has incurred legal or

constructive obligations or made payments on behalf of a joint

venture.

Unrealised gains and losses arising from transactions with

equity-accounted joint ventures and partnerships are

eliminated against the investment to the extent of the Group’s

interest in the investment.

Investments in joint ventures and partnerships in the Company’s

separate financial statements are carried at fair value.

1.7 Financial instruments

a) Financial assets

The Group classifies its financial assets into the following

categories: financial assets at fair value through profit or loss;

loans and receivables; held-to-maturity investments; and

available-for-sale financial assets. Management determines the

classification of its financial assets at initial recognition.

i. Financial assets at fair value through profit or loss

This category has two subcategories: financial assets held for-

trading and those designated at fair value through profit or

loss at inception. A financial asset is classified in this category

if acquired principally for the purpose of selling in the short

term or if so designated by management. Derivatives are also

categorised as held-for-trading unless they are designated as

hedging instruments.

The Group designates financial assets at fair value through

profit or loss when either:

• The assets are managed, evaluated and reported internally

on a fair value basis

• The designation eliminates or significantly reduces an

accounting mismatch which would otherwise arise

• The asset contains an embedded derivative that significantly

modifies the cash-flows that would otherwise be required

under the contract

ii. Loans and receivables

Loans and receivables are non-derivative assets with fixed or

determinable payments that are not quoted in an active market

other than those that the Group intends to sell in the near future.

They arise when the Group provides money, goods or services

directly to a debtor with no intention of trading the receivable.

Trade receivables are measured at initial recognition at fair

value, and are subsequently measured at amortised cost using

the effective interest method.

iii. Held to maturity

Held-to-maturity investments are non-derivative financial assets

with fixed or determinable payments and fixed maturity that

the Group has the positive intent and ability to hold to maturity.

If the Group were to sell other than an insignificant amount of

held-to-maturity assets, the entire category would be tainted

and reclassified as available-for-sale.


114


iv. Available-for-sale

Available-for-sale investments are non-derivative investments

that are not designated as another category of financial assets.

Available-for-sale investments are those intended to be held for

an indefinite period of time, which may be sold in response to

needs for liquidity or changes in interest rates, exchange rates

or equity prices.

v. Recognition and measurement

Purchases and sales of financial assets at fair value through profit

or loss, held-to-maturity and available-for-sale are recognised on

trade date - the date on which the Group commits to purchase

or sell the asset. Loans are recognised when the cash is advanced

to the borrowers. Financial assets are initially recognised at fair

value plus transaction costs for all financial assets not carried at

fair value through profit or loss.

Available-for-sale financial assets and financial assets at fair

value through profit or loss are subsequently measured at fair

value. Loans and receivables and held-to-maturity investments

are subsequently measured at amortised cost using the effective

interest method less impairment loss. Gains and losses arising

from changes in the fair value of the financial instruments

through profit or loss category are included in profit or loss in

the period in which they arise. Gains and losses arising from

changes in the fair value of available-for-sale financial assets

are recognised directly in other comprehensive income, until

the financial asset is disposed of, derecognised or impaired, at

which time the cumulative gain or loss previously recognised

in other comprehensive income is recognised in profit or

loss. However, interest calculated using the effective interest

method is recognised in profit or loss for available-for-sale debt

investments. Dividends on available-for-sale equity instruments

are recognised in profit or loss when the entity’s right to receive

payment is established.

Financial assets (or, where applicable, a part of a financial asset

or part of a group of similar financial assets) are derecognised

when the contractual rights to receive cash-flows from the

financial assets have expired or where the Group has transferred

substantially all the risks and rewards of ownership, without

retaining control. Any interest in the transferred financial assets

that is created or retained by the Group is recognised as a

separate asset or liability.

vi. Cash and cash equivalents

For the purpose of the cash-flow statement, cash and cash

equivalents comprise cash on hand, deposits held on call with

banks, and investments in money market instruments and bank

overdrafts, all of which are available for use by the Group unless

otherwise stated.

Cash and cash equivalents are subsequently measured at

amortised cost in the statement of financial position.

b) Financial liabilities

Financial liabilities are recognised initially at fair value, generally

being their issue proceeds net of transaction costs incurred.

Financial liabilities, other than those at fair value through

profit or loss are subsequently measured at amortised cost and

interest is recognised over the period of the borrowing using

the effective interest method.

Where the Group classifies certain liabilities at fair value through

profit or loss, changes in fair value are recognised in profit or

loss. This designation by the Group takes place when either:

• The liabilities are managed, evaluated and reported

internally on a fair value basis

• The designation eliminates or significantly reduces an

accounting mismatch which would otherwise arise

• The liability contains an embedded derivative that

significantly modifies the cash-flows that would otherwise

be required under the contract

A financial liability is derecognised when the obligation under

the liability is discharged, cancelled or expires.

Where an existing financial liability is replaced by another from

the same lender on substantially different terms, or the terms of

an existing liability are substantially modified, such an exchange

or modification is treated as a de-recognition of the original

liability and the recognition of a new liability, and the difference

in the respective carrying amounts is recognised in profit or loss.

Trade payables are initially measured at fair value, and are

subsequently measured at amortised cost, using the effective

interest method.


115


c) Financial guarantees

Financial guarantees are contracts that require the Group to

make specified payments to reimburse the holder for a loss it

incurs because a specified debtor fails to make payment when

due in accordance with the terms of a debt instrument. Financial

guarantee liabilities are initially recognised at their fair value

and the initial fair value is amortised over the life of the financial

guarantee. The guarantee liability is subsequently measured at

the higher of this amortised amount and the present value of

any expected payment (when payment under the guarantee

has become probable). Financial guarantees are included with

other liabilities.

d) Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount

reported in the statement of financial position when there is a

legally enforceable right to offset the recognised amounts and

there is an intention to settle on a net basis, or realise the asset

and settle the liability simultaneously. Income and expenses are

presented on a net basis only when permitted by the accounting

standards, or for gains and losses arising from a group of similar

transactions such as in the Group’s trading activity.

e) Derivative financial instruments

Certain Group companies use derivative financial instruments

to hedge their exposure to foreign exchange rate risks and other

market risks arising from operational, financing and investment

activities.

The Group does not hold or issue derivative financial instruments

for trading purposes.

The derivatives that do not meet the requirements for hedge

accounting are accounted for as trading instruments.

i. Embedded derivatives

Derivatives may be embedded in another contractual

arrangement (a “host contract”). The Group accounts for an

embedded derivative separately from the host contract when

the host contract is not itself carried at fair value through profit

or loss, the terms of the embedded derivative would meet the

definition of a derivative if they were contained in a separate

contract, and the economic characteristics and risks of the

embedded derivative are not closely related to the economic

characteristics and risk of the host contract. Separated

embedded derivatives are accounted for depending on their

classification, and are presented in the statement of financial

position together with the host contract.

ii. Hedge accounting

The following hedge relationships are applied:

Fair value hedge – a hedge of exposure to changes in fair

value of a recognised asset or liability or an unrecognised firm

commitment, or an identified portion of such an asset, liability

or firm commitment, that is attributable to a particular risk and

could affect profit or loss.

Cash-flow hedge – a hedge of the exposure to variability in

cash-flows that is attributable to a particular risk associated

with a recognised asset or liability or a highly probable forecast

transaction and could affect profit or loss.

a) Fair value hedge

Changes in fair value are recognised in profit or loss.

Any adjustments to the carrying amount related to the hedged

risk are recognised in profit or loss.

b) Cash-flow hedge

Changes in fair value where the portion of the gain or loss is

determined to be an effective hedge is recognised in other

comprehensive income and the ineffective portion is recognised

in profit or loss. The change in fair value recognised directly in

other comprehensive income is transferred to profit or loss

when the future transaction affects profit or loss.

No adjustments are made to the carrying amount of the hedged

item.


116


c. Discontinuation of hedge accounting

The Group discontinues hedge accounting prospectively if any

one of the following occurs:

• The hedging instrument expires or is sold, terminated or

exercised

• The forecast transaction is no longer expected to occur (in

the case of a cash-flow hedge, the cumulative unrealised

gain or loss recognised in other comprehensive income, is

recognised immediately in profit or loss)

• The hedge no longer meets the conditions for hedge

accounting

• The Group revokes the designation

1.8 Impairment of assets

a) Impairment of financial assets carried at amortised cost

The Group assesses whether there is objective evidence that

a financial asset or Group of financial assets not carried at fair

value through profit or loss are impaired at each reporting date.

A financial asset or Group of financial assets is impaired and

impairment losses are incurred if, and only if, there is objective

evidence of impairment as a result of one or more events that

have occurred after the initial recognition of the asset (a loss

event) and that loss event (or events) has an impact on the

estimated future cash-flows of the financial asset or Group of

financial assets that can be reliably estimated. Impairment losses

are recognised in profit or loss and reflected in an allowance

account against loans and advances.

Objective evidence that a financial asset or Group of assets is

impaired includes observable data that comes to the attention

of the Group about the following loss events:

• Significant financial difficulty of the issuer or obligor

• A breach of contract, such as default or delinquency in

interest or principal payments

• The Group granting to the borrower, for economic or legal

reasons relating to the borrower’s financial difficulty, a

concession that the lender would not otherwise consider

• It becoming probable that the borrower will enter

bankruptcy or other financial reorganisation

• The disappearance of an active market for that financial

asset resulting in financial difficulties

• Observable data indicating that there is a measurable

decrease in the estimated future cash-flows from a Group of

financial assets since the initial recognition of those assets,

although the decreases cannot yet be identified with the

individual financial assets in the Group

The Group first assesses whether objective evidence of

impairment exists individually for financial assets that are

individually significant, referred to as specific impairments,

and individually or collectively for financial assets that are not

individually significant. If the Group determines that no objective

evidence of impairment exists for an individually assessed

financial asset, whether significant or not, it includes the asset

in a Group (portfolio) of financial assets with similar credit risk

characteristics and collectively assesses them for impairment.

Assets that are individually assessed for impairment and for

which an impairment loss is, or continues to be, recognised are

not included in a collective assessment of impairment.

The recoverable amount of the assets is calculated as the present

value of estimated future cash-flows, discounted at the original

effective interest rate (i.e. the effective interest rate computed at

initial recognition of the asset).

For the purpose of a collective evaluation of impairment,

financial assets are grouped on the basis of similar credit risk

characteristics (i.e. on the basis of the Group’s grading process

that considers asset type, industry, geographical location,

collateral type, past-due status and other relevant factors).

Those characteristics are relevant to the estimation of future

cash-flows for Groups of such assets by being indicative of

the debtors’ ability to pay all amounts due according to the

contractual terms of the assets being evaluated.

Future cash-flows in a group of financial assets that are

collectively evaluated for impairment are estimated on the

basis of the contractual cash-flows of the assets in the Group,

and as well as historical loss experience for assets with credit

risk characteristics similar to those in the group. Historical loss

experience is adjusted on the basis of current observable data

to reflect the effects of current conditions which did not affect

the period on which the historical loss experience is based. This

also serves to remove the effects of conditions in the historical

period that do not exist currently.


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Estimates of changes in future cash-flows for groups of assets

should reflect and be directionally consistent with changes in

related observable data from period to period (for example,

changes in interest rates, foreign currency exchange rates,

payment status, or other factors indicative of changes in the

probability of losses in the Group and their magnitude). The

methodology and assumptions used for estimating future

cash-flows are reviewed regularly by the Group to reduce any

differences between loss estimates and actual loss experience.

If an impairment loss decreases due to an event occurring

subsequently and the decrease can be related objectively to an

event occurring after the impairment was recognised (such as an

improvement in the debtor’s credit rating), then the previously

recognised impairment loss is reversed through profit or loss

with a corresponding increase in the carrying amount of the

underlying asset. The reversal is limited to an amount that does

not state the asset at more than what its amortised cost would

have been in the absence of impairment.

b) Impairment of available-for-sale financial assets

The Group assesses at each reporting date whether there is

objective evidence that a financial asset or a group of financial

assets is impaired. In the case of equity investments classified as

available-for-sale, a decrease in the fair value of the instrument

below its cost is considered in determining whether the assets

are impaired.

If any such evidence exists for available-for-sale financial assets,

the cumulative loss – measured as the difference between the

acquisition cost and the current fair value, less any impairment

loss on that financial asset previously recognised in profit or loss

– is removed from other comprehensive income and recognised

in profit or loss. Impairment losses recognised in profit or loss on

equity instruments are not reversed through profit or loss.

Any increase in the fair value after an impairment loss has been

recognised is treated as a revaluation and is recognised directly

in other comprehensive income. If, in a subsequent period, the

fair value of a debt instrument classified as available-for- sale

increases and the increase can be objectively related to an event

occurring after the impairment loss was recognised in profit or

loss, the impairment loss is reversed through profit or loss.

c) Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts

of its non-financial assets (other than biological assets, land

and buildings, deferred tax assets and investment property), to

determine whether there is any indication of impairment. If any

such indication exists, then the asset’s recoverable amount is

estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into

the smallest group of assets that generates cash inflows from

continuing use that is largely independent of the cash inflows of

other assets or cash-generating units (CGUs). Goodwill arising

from a business combination is allocated to CGUs or groups

of CGUs that are expected to benefit from the synergies of the

combination.

The ‘recoverable amount’ of an asset or CGU is the greater of its

value in use and its fair value less costs to sell. ‘Value in use’ is

based on the estimated future cash-flows, discounted to their

present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and the risks

specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an

asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. They are

allocated first to reduce the carrying amount of any goodwill

allocated to the CGU, and then to reduce the carrying amounts

of the other assets in the CGU on a pro rata basis

An impairment loss in respect of goodwill is not reversed. For

other assets, an impairment loss is reversed only to the extent

that the asset’s carrying amount does not exceed the carrying

amount that would have been determined, net of depreciation

or amortisation if no impairment loss had been recognised.

Any impairment loss of a revalued asset is treated as a

revaluation decrease.


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1.9 Intangible assets

a) Goodwill

Business combinations are accounted for using the acquisition

method as at the acquisition date.

The Group measures goodwill at the acquisition date as:

• The fair value of the consideration transferred; plus

• The recognised amount of any non-controlling interests in

the acquire; plus

• If the business combination is achieved in stages, the fair

value of the pre-existing equity interest in the acquire; less

• The net recognised amount (generally fair value) of the

identifiable assets required and the liabilities assumed

When the excess is negative, a bargain purchase gain is

recognised immediately in profit and loss.

Subsequent to initial recognition, goodwill is measured at

cost less accumulated impairment losses. Impairment losses

on goodwill are recognised in profit or loss and determined in

accordance with the impairment of non-financial assets.

The consideration transferred does not include amounts related

to the settlement of pre-existing relationships. Such amounts

are generally recognised in profit or loss.

Transaction costs, other than those associated with the issue of

debt or equity securities, that the Group incurs in connection

with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value

at the acquisition. If the contingent consideration is classified

as equity, then it is not remeasured and the settlement is

accounted for within equity. Otherwise, subsequent changes in

the fair value of the contingent consideration are recognised in

profit or loss.

If share-based payment awards (replacement awards) are

required to be exchanged for awards held by the acquiree’s

employees (acquirees’ awards) and relate to past services, then

all or a portion of the amount of the acquirer’s replacement

awards is included in measuring the consideration transferred

in the business combination. This determination is based on the

market-based value of the replacement awards compared to

the market-based value of the acquiree’s awards and the extent

to which the replacement awards relate to past and/or future

service.

b) Intangible assets acquired separately

Intangible assets acquired separately are measured on initial

recognition at cost. Following initial recognition, intangible

assets are carried at cost less any accumulated amortisation and

accumulated impairment losses, if any.

Amortisation is charged on a straight-line basis over the

estimated useful lives of the intangible assets which do not

exceed four years. The estimated useful life and amortisation

method are reviewed at the end of each annual reporting

period, with the effect of any changes being accounted for on

a prospective basis.

c) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are

identified and recognised separately from goodwill where they

satisfy the definition of an intangible asset and their fair values

can be measured reliably. The cost of such intangible assets is

their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in

a business combination are measured at cost less accumulated

amortisation and accumulated impairment losses, on the same

basis as intangible assets acquired separately.

1.10 Foreign currency translation

a) Transactions and balances

Transactions in foreign currencies are translated into South

African Rand at the foreign exchange rate prevailing at the date

of the transaction. The foreign currency gain or loss on monetary

items is the difference between amortised cost in the functional

currency at the beginning of the period, adjusted for effective

interest and payments during the period, and amortised cost in

foreign currency translated at the exchange rate at the end of

the reporting period, if applicable.


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Monetary assets and liabilities denominated in foreign

currencies at the reporting date have been translated into South

African Rand at the rates ruling at that date. Non-monetary

assets and liabilities that are measured in terms of historical cost

in a foreign currency are translated using the exchange rate at

the date of the transaction. Non-monetary assets and liabilities

denominated in foreign currencies that are stated at fair value

are translated to Rand at foreign exchange rates ruling at the

dates the fair value was determined.

Foreign currency differences are recognised in profit and loss,

except for available for sale investments and effective cash-flows

hedges which are recognised in other comprehensive income.

b) Financial statements of foreign operations

All foreign operations have been accounted for as foreign

operations. Assets and liabilities of foreign operations, including

goodwill and fair value adjustments arising on consolidation are

translated into South African Rand at foreign exchange rates

ruling at the reporting date. Income and expenses are translated

at the average foreign exchange rates, provided these rates

approximate the actual rates, for the year. Exchange differences

arising from the translation of foreign operations are recognised

in other comprehensive income. When a foreign operation is

disposed of, in part or in full, the relevant amount in the foreign

currency translation reserve is transferred to profit or loss.

1.11 Investment property

Investment property is property held either to earn rental

income or for capital appreciation, or both.

a) Measurement

Investment property is measured initially at cost, including

transaction costs and directly attributable expenditure in

preparing the asset for its intended use. Subsequently, all

investment properties are measured at fair value. Fair value

is the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction between market

participants at the measurement date.

Valuation takes place annually, based on the aggregate of the

net annual rental receivable from the properties, considering

and analysing rentals received on similar properties in the

neighborhood, less associated costs (insurance, maintenance,

repairs and management fees). A capitalisation rate which

reflects the specific risks inherent in the net cash-flows is applied

to the net annual rentals to arrive at the property valuations.

Gains or losses arising from a change in fair value are recognised

in profit or loss.

External, independent valuers having appropriate, recognised

professional qualifications and recent experience in the location

and category of the property being valued are used to value the

portfolio.

When the use of a property changes such that it is reclassified

as property and equipment, its fair value at the date of

reclassification becomes its cost for subsequent accounting.

1.12 Property, plant and equipment

a) Measurement

All items of property, plant and equipment recognised as assets

are measured initially at cost. Cost includes expenditures that

are directly attributable to the acquisition of the asset. The cost

of self-constructed assets includes the cost of material and

direct labour and any other cost directly attributable to bringing

the asset to a working condition for its intended use, and the

cost of dismantling and removing the items and restoring the

site on which they are located. Except for land, buildings and

aircraft all other items of property, plant and equipment are

subsequently measured at cost less accumulated depreciation

and any accumulated impairment losses.

Land, buildings and aircraft are subsequently measured at fair

value. Land, buildings and aircraft are revalued by external,

independent valuers. Valuers have appropriate recognised

professional qualifications and recent experience in the location

and category of the property being valued are used to value the

portfolio.

Any surplus in excess of the carrying amount is transferred to a

revaluation reserve net of deferred tax. Surpluses on revaluation

are recognised in profit or loss to the extent that they reverse

revaluation decreases of the same assets recognised as expenses

in the previous periods.


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Decreases in revaluation are charged directly against the

revaluation reserves only to the extent that the decrease does

not exceed the amount held in the revaluation reserves in

respect of that same asset, otherwise they are recognised in

profit or loss.

Where parts of an item of property, plant and equipment have

significantly different useful lives, they are accounted for as

separate items of property, plant and equipment. Although

individual components are accounted for separately, the

financial statements continue to disclose a single asset.

b) Subsequent cost

The Group recognises the cost of replacing part of such an item

of property, plant and equipment in carrying amount when that

cost is incurred if it is probable that the future economic benefits

embodied with the item will flow to the Group and the cost of

the item can be measured reliably. All other costs are recognised

in profit or loss as an expense as they are incurred.

c) Depreciation

Depreciation is recognised in profit or loss on a straight-line basis,

based on the estimated useful lives of the underlying assets.

Depreciation is calculated on the cost less any impairment and

expected residual value of the asset. Land is not depreciated.

The estimated useful lives for the current and comparative

periods are as follows:

Item Average useful life

Buildings and infrastructure

• Building structure 50 years

• Elevators 10 years

Plant and machinery

• Aircraft 5 years

• Heavy plant and machinery 10-20 years

• Equipment 8-10 years

Other property, plant and equipment

• Motor vehicles 1-6 years

• Office furniture and equipment 1-6 years

The residual values, useful lives and depreciation method are re-

assessed at each financial year-end and adjusted if appropriate.

d) De-recognition

The carrying amount of items of property, plant and equipment

are derecognised on disposal or when no future economic

benefits are expected from their use or disposal.

Gains or losses arising from de-recognition are determined

as the difference between the net disposal proceeds and the

carrying amount of the item of property, plant and equipment

and included in profit or loss when the items are derecognised.

When revalued assets are sold, the amounts included in the

revaluation reserve are transferred to retained income.

1.13 Biological assets

A biological asset is a living animal or plant.

a) Measurement

A biological asset is measured initially and at reporting date at

its fair value less costs to sell. If the fair value of a biological asset

cannot be determined reliably at the date of initial recognition,

it is stated at cost less any accumulated depreciation and

impairment losses.

Gains or losses arising on the initial recognition of a biological

asset at fair value less costs to sell, and from a change in fair

value less costs to sell of biological assets, are included in profit

or loss in the period in which they arise.

1.14 Leases

a) Finance leases

Leases of assets under which the lessee assumes all the risks and

benefits of ownership are classified as finance leases.

i. Finance leases - Group as lessee

Finance leases are recognised as assets and liabilities in the

statement of financial position at amounts equal to the fair

value of the leased property or, if lower, the present value of

the minimum lease payments. The corresponding liability to


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the lessor is included in the statement of financial position as a

finance lease obligation.

The discount rate used in calculating the present value of the

minimum lease payments is the interest rate implicit in the

lease. The lease payments are apportioned between the finance

charge and reduction of the outstanding liability. The finance

charge is allocated to each period during the lease term so as

to produce a constant periodic rate on the remaining balance

of the liability.

ii. Finance leases - Group as lessor

The Group recognises finance lease receivables in the statement

of financial position.

Finance income is recognised based on a pattern reflecting a

constant periodic rate of return on the Group’s net investment

in the finance lease.

b) Operating leases

Leases of assets under which the lessor effectively retains all the

risks and benefits of ownership are classified as operating leases.

i. Operating leases - Group as lessee

Lease payments arising from operating leases are recognised in

profit or loss on a straight-line basis over the lease term. Lease

incentives received are recognised in profit or loss as an integral

part of the total lease expense.

ii. Operating leases - Group as lessor

Receipts in respect of operating leases are accounted for as

income on the straight-line basis over the period of the lease.

The assets subject to operating leases are presented in the

statement of financial position according to the nature of the

assets.

c) Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether

such an arrangement is or contains a lease. A specific asset is the

subject of a lease if fulfillment of the arrangement is dependent

on the use of that specified asset. An arrangement conveys the

right to use the asset if the arrangement conveys to the Group

the right to control the use of the underlying asset.

At inception or upon re-assessment of the arrangement, the

Group separates payments and other consideration required by

such an arrangement into those for the lease and those for other

elements on the basis of their relative fair values. If the Group

concludes for a finance lease that it is impracticable to separate

the payments reliably, an asset and a liability are recognised

at an amount equal to the fair value of the underlying asset.

Subsequently the liability is reduced as payments are made and

an imputed finance charge on the liability is recognised using

the Group’s incremental borrowing rate.

1.15 Share capital

Ordinary shares are classified as equity. Incremental costs

directly attributable to the issue of the ordinary shares are

recognised as a deduction from equity, net of any tax effects.

1.16 Inventories

a) Spares and consumables

Spares and consumables are valued at the lower of cost and net

realisable value, on a weighted average method.

The cost of inventories comprises all costs of purchase,

conversion and other costs incurred in bringing the inventories

to the present location and condition.

Obsolete, redundant and slow-moving items of spares and

consumable stores are identified on a regular basis and written

down to their net realisable value.

Net realisable value is the estimated selling price in the ordinary

course of business, less the costs of completion and selling

expenses.

b) Raw materials, finished goods and phosphate rock

Raw materials, finished goods and phosphate rock are valued at

the lower of cost of production and net realisable value.


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Cost of production is calculated on a standard cost basis, which

approximates the actual cost and includes the production

overheads. Production overheads are allocated on the basis of

normal capacity to finished goods.

The valuation of inventory held by agents or in transit includes

forwarding costs, where applicable.

1.17 Provisions

Provisions are recognised when:

• The Group has a present obligation as a result of a past event

• It is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation

• A reliable estimate can be made of the obligation

Provisions are determined by discounting the expected

future cash-flows at a pre-tax rate that reflects current market

assessments of the time value of money and the risks specific

to the liability. The unwinding of the discount is recognised as

finance cost. Where some or all of the expenditure required

to settle a provision is expected to be reimbursed by another

party, the reimbursement shall be recognised when, and only

when, it is virtually certain that reimbursement will be received

if the entity settles the obligation. The reimbursement shall

be treated as a separate asset. The amount recognised for the

reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

A constructive obligation to restructure is recognised when an

entity:

• Has a detailed formal plan for the restructuring, identifying

at least:

- The business or part of a business concerned

- The principal locations affected

- The location, function, and approximate number of

employees who will be compensated for terminating

their services

- The expenditures that will be undertaken

- When the plan will be implemented

- Has raised a valid expectation in those affected that

it will carry out the restructuring by starting to implement

that plan or announcing its main features to those affected

by it.

a) Decommissioning provision

The obligation to make good environmental or other damage

incurred in installing an asset is provided in full immediately, as

the damage arises from a past event.

If an obligation to restore the environment or dismantle an asset

arises on the initial recognition of the asset, the cost is capitalised

to the asset and amortised over the useful life of the asset. The

cost of an item of property, plant and equipment includes not

only the ‘initial estimate’ of the costs relating to dismantlement,

removal or restoration of property, plant and equipment at the

time of installing the item but also amounts recognised during

the period of use, for purposes other than producing inventory.

If an obligation to restore the environment or dismantle an asset

arises after the initial recognition of the asset, then a provision is

recognised at the time that the obligation arises.

b) Onerous contracts

A provision for onerous contracts is recognised when the

expected benefits to be derived by the Group from a contract

are lower than the unavoidable cost of meeting its obligations

under the contract. The provision is measured at the present

value of the lower of the expected cost of terminating the

contract and the expected net cost of continuing with the

contract.

Before a provision is established, the Group recognises any

impairment loss on the assets associated with the contract.

1.18 Contingent liabilities and commitments

a) Contingent liabilities

A contingent liability is a possible obligation that arises from

past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future

events not wholly within the control of the Group.

Contingent liabilities are not recognised in the statement of

financial position of the Group but disclosed in the notes.


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After their initial recognition contingent liabilities recognised

in business combinations that are recognised separately are

subsequently measured at the higher of:

• The amount that would be recognised as a provision

• The amount initially recognised less cumulative amortisation

• Contingent liabilities are not recognised. Contingencies are

disclosed in the notes.

b) Commitments

Items are classified as commitments where the Group has

committed itself to future transactions. Commitments are not

recognised in the statement of financial position of the Group

but disclosed in the notes.

1.19 Taxation

a) Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid,

recognised as a liability. If the amount already paid in respect

of current and prior periods exceeds the amount due for those

periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods

are measured at the amount expected to be paid to (recovered

from) the tax authorities, using the tax rates (and tax laws) that

have been enacted or substantively enacted by the end of the

reporting period.

b) Income tax

Current and deferred taxes are recognised as income or an

expense and included in profit or loss for the period, except to

the extent that the tax arises from:

• A transaction or event which is recognised, in the same or a

different period, to other comprehensive income

• A business combination

Current tax is charged or credited in profit or loss, except when

it relates to items credited or charged directly to equity or other

comprehensive income, in which case the current tax is also

recognised in equity or other comprehensive income.

Current tax also includes any adjustment to tax payable in

respect of previous years.

c) Deferred tax

Deferred tax is recognised in respect of temporary differences

between the carrying amounts of assets and liabilities for

financial reporting purposes and the amounts used for taxation

purposes. Deferred tax is recognised for all taxable temporary

differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts

used for taxation purposes. Deferred tax assets are recognised

to the extent that it is probable that future taxable profit will be

available against which unused tax deductions can be utilised.

Deferred tax assets are reviewed at each reporting date and

are reduced to the extent that it is no longer probable that the

related tax will be realised.

Deferred tax is not recognised if the temporary differences

arise on the initial recognition of goodwill or from the initial

recognition (other than in a business combination) of other

assets and liabilities in a transaction that affects neither

taxable income nor accounting income. Deferred tax is also

not recognised in respect of temporary differences relating

to investments in associates, subsidiaries and joint ventures

to the extent that it is probable that they will not reverse in

the foreseeable future and the timing of the reversal of the

temporary difference is controlled.

Deferred tax is measured at the tax rates that are expected to

be applied to temporary differences when they reverse, based

on the laws that have been enacted or substantively enacted by

the reporting date.

Deferred tax is charged or credited in profit or loss, except when

it relates to items credited or charged directly to equity or other

comprehensive income, in which case the deferred tax is also

recognised in equity or other comprehensive income.

Deferred tax assets and liabilities are offset if there is a legally

enforceable right to offset current tax liabilities and assets, and

they relate to taxes levied by the same tax authority on the same

taxable entity, or on different tax entities, but they intend to

settle current tax liabilities and assets on a net basis or their tax

assets and liabilities will be realised simultaneously.


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1.20 Revenue

Revenue comprises sales to customers, dividends, interest,

rentals and fee income, but excludes value-added tax, and is

measured at the fair value of the consideration received or

receivable, net of returns and allowances, trade discounts and

volume rebates.

a) Sales to customers

Revenue from sale of goods is recognised in profit or loss

when the significant risks and rewards of ownership have been

transferred to the customer, recovery of the consideration is

probable, associated costs and possible return of goods can

be estimated reliably and there is no continuing managerial

involvement with the goods.

b) Dividends

Dividends income is recognised in profit or loss on the date

that the Group’s right to receive payment is established.

Capitalisation shares received are not recognised as income.

c) Interest

Interest income and expense are recognised in profit or loss

using the effective interest method. The effective interest

rate is the rate that exactly discounts the estimated future

cash payments and receipts through the expected life of the

financial asset (or, where appropriate, a shorter period) to the

carrying amount of the financial asset. The effective interest rate

is established on initial recognition of the financial asset and is

not revised subsequently.

d) Fees

• Income earned on the execution of a significant act is

recognised when the significant act has been performed

• Income earned from the provision of services is recognised

as the service is rendered by reference to the stage of

completion of the service

• Income that forms an integral part of the effective interest

rate of a financial instrument is recognised as an adjustment

to the effective interest rate and recognised in interest

income

e) Rental

See policy on leases (1.14).

1.21 Borrowing costs

Borrowing costs are expensed in the period in which they

are incurred, except to the extent that they are capitalised

when directly attributable to the acquisition, construction or

production of a qualifying asset.

1.22 Employee benefits

a) Post-retirement medical benefits

Some Group companies provide post-employment healthcare

benefits to their retirees. The entitlement to post-employment

healthcare benefits is based on the employee remaining in

service up to retirement age. The expected costs of these

benefits are accrued over the period of employment, using the

projected unit of credit method. Valuations of these obligations

are carried out annually by independent qualified actuaries.

b) Defined contribution plans

The majority of the Group’s employees are members of defined

contribution plans and contributions to these plans are

recognised in profit or loss in the year to which they relate.

A defined contribution plan is a pension plan under which the

Group pays fixed contributions into a separate entity (a fund)

and under which the Group will have no legal or constructive

obligations to pay further contributions if the fund does not

hold sufficient assets to pay all employees benefits relating to

employee service in the current and previous periods.

c) Defined benefit plans

The Group operates a defined benefit and a defined contribution

plan, the assets of which are held in separate trustee-

administered funds. The schemes are generally funded through

payments to insurance companies or trustee-administered

funds as determined by periodic actuarial valuations. A defined

benefit plan is a pension plan that defines an amount of pension

benefit to be provided, usually as a function of one or more

factors such as age, years of service and compensation.


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The liability in respect of defined benefit pension plans is

the present value of the defined benefit obligation at the

reporting date less the fair value of plan assets. The defined

benefit obligation is calculated annually by independent

actuaries using the projected unit credit method. The present

value of the defined benefit obligation is determined by

discounting the estimated future cash outflows using interest

rates of government securities that have terms to maturity

approximating the terms of the related liability. Actuarial gains

and losses arising from experience adjustments and the effects

of changes in actuarial assumptions to the defined benefit plans

are recognised fully in other comprehensive income.

Past-service costs are recognised immediately in profit or loss

when they occur.

d) Short-term employee benefits

Short-term employee benefit obligations are measured on an

undiscounted basis and are expensed as the related services are

provided. A liability is recognised for the amount expected to be

paid under short-term cash bonus or profit-sharing plans if the

Group has a present obligation to pay this amount as a result of

past service provided by the employee, and the obligation can

be estimated reliably.

1.23 Segment reporting

An operating segment is a component of the Group that

engages in business activities from which it may earn revenues

and incur expenses, including revenue and expenses that relate

to transactions with any of the Group’s other components,

whose operating results are reviewed regularly by the executive

committee to make decisions about resources allocated to each

segment and assess its performance, and for which discreet

financial information is available.

1.24 Discontinued operations and non-current assets held-for-sale

a) Discontinued operations

A discontinued operation is a component of the Group’s

business that represents a separate major line of business or

geographical area of operations or is a subsidiary acquired

exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal

or when the operation meets the criteria to be classified as held-

for-sale, if earlier. A disposal group that is to be abandoned may

also qualify.

b) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for

sale if their carrying amount will be recovered through a sale

transaction rather than continuing use. This classification is only

met if the sale is highly probable and the assets are available for

immediate sale.

c) Measurement

Immediately before classification as held-for-sale, the

measurement of the assets (and all assets and liabilities in a

disposal group) is brought up-to-date in accordance with the

applicable IFRS. Then, on initial classification as held for sale, the

non-current assets and disposal groups are recognised at the

lower of carrying amount and fair value less costs to sell. Any

impairment loss on a disposal group is first allocated to goodwill

and then to remaining assets and liabilities on a pro rata basis,

except that no loss is allocated to inventories, financial assets,

deferred tax assets, employee benefit assets, investment

property and biological assets, which continue to be measured

in accordance with the Group’s accounting policies.

Impairment losses on initial classification as held-for-sale are

included in profit or loss, even when there is a revaluation. The

same applies to gains and losses on subsequent measurement.

d) Reclassification

The non-current assets held-for-sale will be reclassified

immediately when there is a change in intention to sell. At

that date, it will be measured at the lower of its carrying value

before the asset was classified as held for sale, adjusted for any

depreciation, amortisation or revaluations that would have

been recognised had the asset not been classified as held-for-

sale and its recoverable amount at the date of the subsequent

decision not to sell.

1.25 Related parties

The IDC operates in an economic environment together

with other entities directly or indirectly owned by the South


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African government. Only parties within the national sphere of

government will be considered to be related parties.

Key management is defined as individuals with the authority

and responsibility for planning, directing and controlling the

activities of the entity. All individuals from the level of executive

management up to the Board of Directors are regarded as key

management per the definition of the standard. Close family

members of key management personnel are considered to be

those family members who may be expected to influence, or

be influenced by key management individuals in their dealings

with the entity.

Other related party transactions are also disclosed in terms of

the requirements of IAS 24.

1.26 Share based payments

A Group company operates an equity-settled share based plan

and a cash-settled share based plan.

The equity settled share-based payments vest immediately, the

reserve was recognised in equity at grant date.

The cash-settled plan was entered into with one of the Group

company’s employees, under which the company receives

services from employees by incurring the liability to transfer

cash to the employees for amounts that are based on the value

of the company’s shares. The fair value of the transaction is

measured using an option pricing model, taking into account

all terms and conditions. The fair value of the services received

in exchange for the grant of the options is recognised as an

expense. The total amount to be expensed is determined by

reference to the fair value of the options granted:

• Including any market performance conditions

• Excluding the impact of any service and non-market

performance vesting conditions

• Including the impact of any non-vesting conditions

The services received by the company are recognised as they are

received and the liability is measured at fair value. The fair value

of the liability is re-measured at each reporting date and at the

date of settlement. Any changes in the fair value are recognised

in profit or loss for the period.

1.27 Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.

Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

a) Financial assets and liabilities

i. Policy applicable from 1 April 2013

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the Instrument but no later


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than when the valuation is wholly supported by observable market data or the transaction is closed out.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

ii. Policy applicable before 1 April 2013

‘Fair value’ is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.

When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

If a market for a financial instrument is not active, then the Group establishes fair value using a valuation technique. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price – i. e. the fair value of the consideration given or received. However, in some cases the initial estimate of fair value of a financial instrument on initial recognition may be different from its transaction price. If this estimated fair value is evidenced by comparison with other observable current market transactions in the same instrument (without modification) or based on a valuation technique whose variables include only data from observable markets, then the difference is recognised in profit or loss on initial recognition of the instrument. In other cases, the fair value at initial recognition is considered to be the transaction price and the difference is not recognised in profit or loss immediately but is recognised over the life of the instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value becomes observable.

b) Property, plant and equipment

The market value of land and buildings is the estimated amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

c) Intangible assets

The fair value of other intangible assets is based on the discounted cash-flows expected to be derived from the use and eventual sale of the assets.

d) Investment property

Valuation methods and assumptions used in determining the fair value of investment property

i. Capitalisation method

The value of the property reflects the present value of the sum of the future benefits which an owner may expect to derive from the property. These benefits are expressed in monetary terms and are based upon the estimated rentals for the property in an orderly transaction between market participants. The usual property outgoings are deducted to achieve a net rental, which is then capitalised at a rate an investor, would require receiving the income.

ii. Comparative method

The method involves the identification of comparable properties sold in the area or in a comparable location within a reasonable time. The selected comparable properties are analysed and compared with the subject property. Adjustments are then made to their values to reflect any differences that may exist. This method is based on the assumption that a purchaser will pay an amount equal to what others have paid or are willing to pay.

iii. Residual land valuation method

This method determines the residual value which is the result of the present value of expected inflows less all outflows (including income tax) less the developer’s required profits. This is the maximum that the developer can afford to pay for the real estate. This residual value is in theory also the market value of the land.

e) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash-flows, discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined


128


by reference to similar liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by reference to similar lease agreements.

f) Share-based payment transactions

A Group company entered into a Business Assistance Agreement, which is considered to be an equity-settled, share-based payment transaction. The fair value of the technical and business services received in exchange for the grant of equity instruments is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the equity instruments granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of equity instruments that are expected to vest.

1.28 Use of estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

a) Income taxes

Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

b) Fair value of financial instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The

Group uses its judgement to make assumptions that are mainly based on market conditions existing at each reporting date.

Listed equities are valued based on their listed value (fair value) on 31 March 2014.

Unlisted equities are valued based on various valuation methods, including free cash-flow, price earnings (PE) and net asset value basis (NAV) bases.

Judgements and assumptions in the valuations and impairments include determining the:

• Free cash-flows of investees• Replacement values• Discount or premium applied to the IDC’s stake in investees• Sector/subsector betas• Debt weighting – this is the target interest bearing debt level• Realisable value of assets• Probabilities of failure in using the NAV-model

c) Post-employment obligations

Significant judgement and actuarial assumptions are required to determine the fair value of the post-employment obligations. More detail on these actuarial assumptions is provided in the notes to the financial statements.

d) Environmental rehabilitation liability

In determining the environmental rehabilitation liability, an inflation rate of 5.78% (FY2013: 6.0%) was assumed to increase the rehabilitation liability for the next 20 years, and a rate of 8.39% (FY2013: 8.37%) to discount that amount to present value. The discount rate assumed of 8.39% is a risk-free rate, specifically the rate at which the R186 South African government bond was quoted at year end.

e) Fair value of share-based payments

The fair value of equity instruments on grant date is determined based on a simulated company value, using the Geometric Brownian Motion model. The valuation technique applied to determine the simulated company value is part of the Monte Carlo simulation methodology.


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f) Impairment of assets

The Group follows the guidance of IAS 36, Impairment of Assets to determine when an asset is impaired. This determination requires significant judgement. In making this judgement, the group evaluates the impairment indicators that could exist at year end, such as significant decreases in the selling prices of finished goods, significant decreases in sales volumes and changes in the international export regulatory environment.

1.29 Transfer of functions

a) Between entities under common control

i. Recognition

The receiving entity recognises the assets and liabilities acquired through a transfer of functions on the effective date of the transfer. All income and expenses that relate to the functions transferred are also recognised from the effective date of the transfer. The recognition of these income and expenses are governed by the accounting policies related to those specific income and expenses and accordingly this policy does not provide further guidance thereon.

ii. Measurement

Assets and liabilities acquired, by the receiving entity, through a transfer of functions are measured at initial recognition at the carrying value that they were transferred. The difference between the carrying value of the assets and liabilities transferred and any consideration paid for the assets and liabilities transferred is recognised in equity. The carrying value at which the assets and liabilities are initially recognised is therefore the deemed cost thereof. Therefore the subsequent measurement of these assets and liabilities the accounting policies relevant to those assets and liabilities are followed. Accordingly, this accounting policy does not provide additional guidance on the subsequent measurement of the transferred assets and liabilities.

iii. Derecognition

The transferring entity derecognises the assets and liabilities on the effective date of the transfer of functions. These transferred assets and liabilities are measured at their carrying values upon derecognition. The resulting difference between the carrying value of the assets and liabilities transferred and any consideration received for the assets and liabilities transferred is recognised in equity.

b) Between entities that are not under common control

i. Recognition

The receiving entity recognises the assets and liabilities acquired through a transfer of functions on the effective date of the transfer. All income and expenses that relate to the functions transferred are also recognised from the effective date of the transfer. The recognition of these income and expenses are governed by the accounting policies related to those specific income and expenses and accordingly this policy does not provide further guidance thereon.

ii. Measurement

Assets and liabilities acquired, by the receiving entity, through a transfer of functions are measured at initial recognition at the fair value that they were transferred. The difference between the fair value of the assets and liabilities transferred and any consideration paid for the assets and liabilities transferred is recognised in profit or loss. The fair value of these assets and liabilities is therefore deemed cost of thereof. Therefore the subsequent measurement of these assets and liabilities the accounting policies relevant to those assets and liabilities are followed. Accordingly, this accounting policy does not provide additional guidance on the subsequent measurement of the transferred assets and liabilities.

iii. Derecognition

The transferring entity derecognises the assets and liabilities on the effective date of the transfer of functions. These transferred assets and liabilities are measured at their fair values upon derecognition. The resulting difference between the fair value of the assets and liabilities transferred and any consideration received for the assets and liabilities transferred is recognised in profit or loss.

1.30 Preparation of the annual financial statements

The financial results have been prepared under the supervision of Gert Gouws CA(SA), the Group’s Chief Financial Officer.


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2. Financial assets and liabilitiesThe table below sets out the Group’s classification of each class of financial assets and liabilities, and their fair values.

Group – 2015

Figures in Rand million Notes Held for trading

Loans and receivables

Available-for sale

Other amortised

cost Total Fair value

Cash and cash equivalents 5 - 8,257 - - 8,257 8,257

Loans and advances to clients 8 - 22,412 - - 22,412 22,032

Investments – listed equities 9 - - 43,519 - 43,519 43,519

Investments – unlisted equities 9 - - 7,747 - 7,747 7,747

Investments – preference shares 9 140 - 5,945 - 6,085 6,085

Derivative assets 19 4 - - - 4 4

Trade and other receivables 6 - 2,869 - - 2,869 2,869

Loans 22 - - - 24,005 24,005 22,460

Derivative liabilities 19 56 - - - 56 56

Bank overdrafts 5 - - - 44 44 44

Trade and other payables 20 - - - 3,354 3,354 3,354

Group – 2014

Figures in Rand million Notes

Held for

trading

Loans and

receivables

Available-

for sale

Other

amortised









Loans 22 - - - 21,350 21,350 21,086


Bank overdrafts 20 - - - 106 106 106

Trade and other payables 20 - - - 3,186 3,186 3,186


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Company – 2015

Figures in Rand million NotesHeld for trading


Available-for sale

Other amortised








Loans 22 - - - 33,566 33,566 32,058


Trade and other payables 20 - - - 953 953 953

Company – 2014

Figures in Rand million Notes Held for trading


Available-for sale

Other amortised








Trade and other receivables 6 - 897 - - 897 897

Loans 22 - - - 29,017 29,017 28,850


Trade and other payables 20 - - - 722 722 722

3. Financial risk managementFinancial risk

This risk category encompasses losses that may occur as a result of the way the IDC is financed and its own financing or investment

activities. Financial risk includes credit and settlement risk related to the potential for counterparty default, market risk related to

volatility in interest rates, exchange rates, commodity and equity prices, liquidity / funding risk related to the cost of maintaining various

financial positions as well as financial compliance risk. Other financial risks faced by the Corporation include the risk of concentration

of investments in certain economic sectors, regions and/or counterparties as well as the risk of over-dependency in relation to income

on a limited number of counterparties and/or financial products and the risk of margin erosion due to inappropriate pricing relative to

the cost of funding. The management of these risk areas is therefore critical for the IDC.


2. Financial assets and liabilities (continued)

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Financial: credit risk

This refers to the risk that a counterparty to a financial transaction will fail to meet its obligations in accordance with the agreed terms

and conditions of the contract, either because of bankruptcy or for any other reason, thereby causing the asset holder to suffer a

financial loss. Credit risk, as defined by the IDC, comprises the potential loss on loans, advances, guarantees, quasiequity and equity

investments due to counterparty default.

Credit risk arises as a result of the Corporation’s lending activities as well as the placement of deposits with financial institutions.

Approach to Managing Credit Risk

The IDC endeavours to maintain credit risk exposure within acceptable parameters, managing the credit risk inherent in the entire

portfolio as well as the risk associated with individual clients or transactions. The effective management of credit risk is a critical

component of a comprehensive approach to risk management and is essential to the long-term success of the Corporation. This is

the dominant risk within the IDC as the providing of loans, advances, quasi equity, equity investments and guarantees represent the

Corporation’s core business.

Managing Credit Risk Concentration

Risk concentrations can arise in a financial organisation’s assets, liabilities or off-balance sheet items, through the execution or

processing of transactions (either product or service), or through a combination of exposures across these broad categories. The

potential for loss reflects the size of the position and the extent of loss given a particular adverse circumstance. The IDC can be exposed

to various forms of credit risk concentration which, if not properly managed, may cause significant losses that could threaten its financial

health. Accordingly the IDC considers the management (including measurement and control) of its credit concentrations to be of vital

importance. There is recognition in Basel II that portfolios of financial institutions can exhibit credit concentrations and that prudently

managing such concentrations is one of the important aspects in effective credit risk management. However, despite the recognition

of credit concentrations as important sources of risk for portfolios, there is no generally accepted approach or methodology for dealing

with the issue (including measurement) of concentration particularly with respect to sector or industry concentration.

Concentrations within a lending and/or investment portfolio can be viewed in a variety of ways: by borrower, product type, collateral

type, geography, economic sector and any other variable that may be associated with a group of credits. Investment or credit

concentrations are considered to be a large group of exposures that respond similarly to the same stresses. These stresses can be:

• Sensitivity to a certain industry or economic factors• Sensitivity to geographical factors, either a single country or region of interlinked ones• Sensitivity to the performance of a single company or counterparty; and/or

• Sensitivity to a particular risk mitigation technique, e.g. a particular collateral type

The IDC has various established methodologies for the management of the credit concentrations it is exposed to and has

established risk concentration limits and policies for:

• Individual and groups of counterparties and/or related parties• Geographical locations

• Economic sectors


3. Financial risk management (continued)

133


The concentration limits are reviewed on an annual basis or sooner should the need arise. The status of the IDC investment book is

reported to IDC Executive Management, the Board Risk and Sustainability Committee and the IDC Board on a regular basis.

Counterparty and related party limits

The need for Counterparty and related party limits are to identify and protect the IDC’s Statement of Financial Position and Statement

of Comprehensive Income from significant losses/volatility which threaten financial sustainability, should a counterparty default or

experience material loss in value. A Counterparty is defined as IDC’s client whereas a related party is any legal entity to whom the IDC

has a credit exposure to, which has one or more of the following similarities with another client which IDC has or had a credit exposure

to:

• Shareholding of more than 50%• Management control• Revenue or expenses reliance of 51% or more, and/or• Provision of security for 51% or more of IDC’s exposure

The Basel principles for the management of credit risk indicate in particular, that an important element of credit risk management is the

establishment of exposure limits on single counterparties and groups of connected counterparties. In determining the recommended

Counterparty limit for the IDC, its strategic objectives are taken into account.

Geographical / Regional limits and Country Threshold

The focus of the IDC’s activities in the African continent is determined by its mandate and investment is driven by the IDC’s Rest

of Africa engagement strategy and managed through our investment criteria and regional investment limits, including country

boundaries. In order for IDC to achieve its mandate in the Rest of SADC and the Rest of Africa, the Corporation focuses on being a

catalyst for sustainable economic change. The IDC views Africa in terms of South Africa, the Southern African region and the Rest of

Africa. This distinction is evident from the importance that the South African Government places on Southern Africa relative to the

rest of the Continent. As such the Corporation’s activities are weighted in favour of Southern Africa in terms of budget allocation and

resultant exposure. The IDC’s objectives are to contribute to the economic integration and industrial development in SADC and the

Rest of Africa.

Given the importance of the IDC’s mandate and its objectives, in conjunction with the consistent improvement of the African economic

landscape, both in performance and risk profile, Portfolio and Regional Limits and Country Thresholds are reviewed at least on an

annual basis in order to support and enhance the developmental objectives of the IDC’s strategy as well as its vision and mission

statement.

The IDC continues to diversify its regional funding profile from being historically concentrated in the developed regions to other less

developed provinces.

Should approval of a transaction result in breach of this limit explicit approval is required from the Board Investment Committee.



134


Geographical analysis

Group Company

Loans and advances to clients

Investment Securities




Carrying amount as per Notes 8 and 9 22,412 20,818 57,351 78,080 21,760 20,298 35,159 46,645

Concentration by location:

South Africa 16,398 15,873 54,697 76,106 15,746 15,353 32,505 44,671

SADC 2,742 2,273 867 503 2,742 2,273 867 503

Rest of Africa 3,272 2,519 87 51 3,272 2,519 87 51

Outside Africa - 153 1,700 1,420 - 153 1,700 1,420

22,412 20,818 57,351 78,080 21,760 20,298 35,159 46,645

Carrying value of available-for-sale investments, loans and advances, excluding investments in subsidiaries, associates and joint ventures.

Economic sector limits

Sector concentration remains one of the key strategic priorities of the Corporation. Concentration risk in the context of sectors

generally results from an uneven distribution of an institution’s exposure to industry sectors which can generate losses large enough

to jeopardise its solvency or profitability. In particular, sector concentration arises because business conditions and hence default risk

may be linked across and within industry sectors within the economy. Concentrations of credit exposures in sectors can pose risks to the

earnings and capital of any financial institution in the form of unexpected losses. One of the risk management techniques of managing

sector risk concentration entails the establishment of concentration limits, the monitoring and analysis thereof. The monitoring and

limiting of the concentration of exposures in certain sectors is necessary to reduce the risk of an exposure to a significant downturn in a

particular industry in time, and thus to be able to avoid losses, as far as possible, by implementing counter measures (e.g. withdrawing

from, reducing or hedging certain exposures). Experience has shown that the earlier risks are identified, the more effectively it can be

countered.

Although the IDC’s business cuts across a number of sectors, it could be exposed to concentration risk by virtue of disproportionately

large exposures in any of these sectors. Managing and monitoring such concentrations to limit downside potential is therefore an

integral part of an effective risk management programme. To avoid undue losses due to associated exposures, the IDC strives to

identify potential common risk factors and minimise its aggregate exposure to these risk factors. By spreading its risk over many

sectors instead of a few, the IDC can minimise the collective impact of economic events or trends on its earnings and capital. Sector

diversification should, by reducing dependence on specific sectors, assist in obtaining assets whose performance is not affected by

the same external factors.

The goal of Sector limits is for the IDC to attempt to diversify or at least identify its portfolio concentrations based on exposures

to sectors and to identify concentrations of exposures that could become closely related, especially during a crisis; this provides

an important mechanism to protect the long term financial sustainability of the IDC. The key challenge to establish a Sector limit

methodology is to ensure that it is effective in protecting the institution from credit events and be practical in its enforcement. The

establishment of Sector limits is aligned with the overall strategy of the IDC (including its risk appetite).



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Sectoral analysisGroup Company





Figures in Rand million 2015 2014 2015 2014 2015 2014 2015 2014Carrying amount as per Note 8 and 9 22,412 20,818 57,351 78,080 21,760 20,298 35,159 46,645Concentration by sector, as per Standard Industrial Classifications (SIC):Agriculture, forestry and fishing 1,513 1,330 79 223 1,446 1,283 79 223Basic chemicals 118 143 739 787 118 143 739 787Basic iron and steel 39 118 2,325 2,560 39 118 2,325 2,560Basic non-ferrous metals 17 17 9,001 11,011 17 17 9,001 11,011Beverages 13 6 - - 9 1 - -Building construction 413 504 48 234 281 443 48 234Business services 110 74 39 29 66 73 39 29Catering and accommodation services 2,348 2,101 37 15 2,335 2,095 29 15Coal mining 583 454 85 86 583 454 85 86Coke and refined petroleum products 5 5 - - 5 5 - -Communication 1,809 1,785 7 7 1,807 1,783 7 7Electrical machinery 339 222 35 66 339 219 35 66Electricity, gas and steam 2,616 1,669 2,209 1,056 2,615 1,667 2,209 1,056Finance and insurance 560 465 203 692 559 463 203 673Food 1,487 1,361 42 41 1,471 1,356 42 41Footwear 77 46 - - 75 56 - -Furniture 295 279 377 - 295 279 377 -Glass and glass products 110 122 - - 110 122 - -Gold and uranium ore mining 329 636 907 503 329 636 907 503Government 15 22 - - 15 22 - -Leather & leather products 18 13 - - 18 13 - -Machinery and equipment 439 603 - - 439 601 - -Medical, dental and other health and veterinary services

315 233 2,356 2,124 305 229 2,356 2,124

Metal products excluding machinery 827 746 54 47 825 746 54 47Motor vehicles, parts and accessories 1,048 915 84 83 1,036 912 84 83Non-metallic minerals 470 336 268 12 467 333 268 12Other community, social and personal services

331 383 1,641 1,797 324 381 1,641 1,797

Other chemicals and man-made fibres 1,005 526 22,093 31,521 746 526 137 105Other industries 56 195 228 - 44 85 - -Other mining 2,767 3,384 13,227 24,070 2,823 3,373 13,227 24,070Other services - - 222 200 - - 222 200Other transport equipment 134 145 755 823 134 145 755 823Paper and paper products 33 6 18 17 32 6 18 17Plastic products 190 198 - - 190 198 - -Printing, publishing and recorded media 28 34 - - 23 32 - -Professional and scientific equipment 70 71 61 36 70 71 61 36Rubber products 4 4 - - 4 4 - -Television, radio and communication equipment

17 38 1 3 16 37 1 3

Textiles 256 327 1 1 254 325 1 1Transport and storage 544 342 87 - 482 330 87 -Water supply 327 277 - - 327 277 - -Wearing apparel 292 191 - - 290 188 - -Wholesale and retail trade 75 326 - 31 34 96 - 31Wood and wood products 370 166 122 5 363 155 122 5

22,412 20,818 57,351 78,080 21,760 20,298 35,159 46,645

*Carrying value of available-for-sale investments, loans and advances, excluding investments in subsidiaries, associates and joint ventures.



136


Internal rating model and pricing

The IDC has progressed well in developing internal credit rating models. To date Internal Rating Templates (IRT’s) have been developed and implemented for Small and Medium Enterprises (SME’s), Middle Market clients and Projects (both in and outside South Africa). The SME and Middle Market methodologies are principally based on Moody’s KMV products, including RiskAnalyst and RiskCalc South Africa. Project IRT’s have been developed internally. During the year under review, IDC commenced with the developing of IRT’s for specific business sectors. The probabilities of default and risk ratings produced by the SME, Middle Market and Project IRT’s are key tools utilised in determining the credit risk and appropriate pricing structures for these facilities.

The key objectives of internal rating methodologies and related rating models are:

• To assess the overall credit or investment risk on a quantitative and objective basis• To objectively determine the credit quality of individual clients as well as the portfolio• To aid in portfolio analysis• To allow migration analysis of individual clients as well as the portfolio• To assist in identifying which clients are due for review

IDC has employed the services of consultants and is in the process of redesigning and developing its Project Finance, SME/Middle Market and Equity rating and pricing models.



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Maximum credit risk exposure

Group Company






Carrying amount as per Note 8 and 9* 22,412 20,818 57,351 78,080 21,760 20,298 35,159 46,645

Individually impaired

Low risk 370 466 1,602 1,036 266 236 1,602 1,036

Medium risk 2,309 2,129 561 489 2,242 2,101 558 471

High risk 2,975 2,509 1,167 1,176 2,743 2,395 1,162 1,176

Gross amount 5,654 5,104 3,330 2,701 5,251 4,732 3,322 2,683

Allowance for impairment (3,729) (3,472) (2,307) (2,056) (3,412) (3,311) (2,307) (2,056)

Carrying amount 1,925 1,632 1,023 645 1,839 1,421 1,015 627

Past due but not impaired

Low risk 312 695 85 492

Medium risk 1,494 416 1,486 409

High risk 262 442 256 440

Carrying amount 2,068 1,553 1,827 1,341

Past due comprises of:

00 – 30 days 281 246 61 56

31 – 60 days 65 1,108 62 1,107

61 – 90 days 58 54 57 53

91 – 120 days 32 53 29 52

120 days + 1,632 92 1,618 73

Carrying amount 2,068 1,553 1,827 1,341

Neither past due nor impaired

Low risk 7,176 7,471 38,638 59,573 6,850 7,389 16,683 28,155

Medium risk 10,618 9,978 17,690 17,856 10,574 9,963 17,461 17,856

High risk 1,043 561 - 6 1,078 561 - 7

Carrying amount 18,837 18,010 56,328 77,435 18,502 17,913 34,144 46,018

Portfolio impairment (418) (377) - - (408) (377) - -

Total carrying amount 22,412 20,818 57,351 78,080 21,760 20,298 35,159 46,645

Carrying value of renegotiated loans 2,191 1,822 - - 2,460 1,822 - -

* Carrying value of available-for-sale investments, loans and advances, excluding investments in subsidiaries, associates and joint ventures.

The IDC loan book is reviewed on a regular basis, by IMC Loans, which monitors and manages the quality and arrears on a proactive

basis. Clients are classified according to their risk profiles based on the most recent available financial information and repayment

profile. A low risk client is a client that is not in arrears and for which no impairment triggers have been identified. A medium risk client

is one which is in arrears by more than 60 days and/or for which impairment triggers have been identified. A high risk client is one

who is in arrears and/or for whom impairment triggers have been identified and who fails to respond to initial legal action (e.g. letter

of demand). High risk clients include those for which legal action is in progress or where the client has ceased manufacturing or has

been placed in liquidation.



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Impaired loans and investments

Impaired loans and investments are loans and investments for which the Group determines that it is probable that it will be unable to

collect all principal and interest due according to the contractual terms of the loan/investment agreements.

Past due but not impaired loans

These are loans and securities where contractual interest or principal payments are past due but the Group believes that impairment

is not appropriate on the basis of level of security/collateral available and/or the stage of collection of amounts owed to the Group.

Allowances for impairment

The Group establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main

components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss

allowance on the entire portfolio.

Renegotiated loans

Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position and

where the Group has made concessions that it would not otherwise consider. Once the loan is restructured it remains in this category

independent of satisfactory performance after restructuring.

Collateral

The Group holds collateral against loans and advances to clients in the form of mortgage bonds over property, other registered

securities over assets and guarantees. Estimates of fair values are based on the value of collateral assessed at the time of borrowing

and are generally not updated except when a loan is individually assessed as impaired.

An estimate of the fair value of collateral held against financial assets is shown below:

Group Company

Figures in Rand million 2015 2014 2015 2014

IDC financing activities

Against impaired assets

General notarial bond 27 411 27 411

Special notarial bonds 109 77 109 77

Mortgage bond 326 513 326 513

Other 36 1 36 1

498 1,002 498 1,002

Gross value of impaired loans as at 31 March 5,654 5,104 5,251 4,732

Against loans in arrears and not impaired

General notarial bond 805 2,083 805 2,083

Mortgage bond 193 174 193 174

Special notarial bond 183 387 183 387

Other 21 37 21 37

1,202 2,681 1,202 2,681

Gross value of loans in arrears not impaired as at 31 March 2,068 1,553 1,827 1,341



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Liquidity risk

Liquidity risk refers to the risk that the Group will not be able to meet its obligations promptly for all maturing liabilities, increase

in financing assets, including commitments and any other financial obligations (funding liquidity risk), or will only able to do so at

materially disadvantageous terms (market liquidity risk).

Sources of liquidity risk include:

• Unpredicted accelerated drawdowns on approved financing or call-ups of guarantee obligations• Inability to roll and/or access new funding• Unforeseen inability to collect what is contractually due to the Group• Liquidity stress at subsidiaries and/or other SOE’s• A recall without due notice of on-balance sheet funds managed by the Group on behalf of 3rd parties• A breach of covenant(s), resulting in the forced maturity of borrowing(s)• Inability to liquidate assets in a timely manner with minimal risk of capital losses

Day-to-day liquidity management is performed by Corporate Treasury within Board approved treasury limits, such that:

• At all times, there is sufficient readily-available liquidity to meet probable operational cash-flow requirements for a rolling three months period

• Excess liquidity is minimised in order to limit the consequential drag on profitability

Liquidity coverage ratios are used to ensure that suitable levels of unencumbered high-quality liquid assets are held to protect against

unexpected yet plausible liquidity stress events. Two separate liquidity stresses are considered, firstly an acute three month liquidity

stress (Scenario 1) impacting strongly on both funding and market liquidity and secondly, a protracted twelve month liquidity stress

(Scenario 2) impacting moderately on both funding and market liquidity. Approved high-quality liquid assets include cash, near-cash,

committed facilities, as well as a portion of the Group’s listed equity investments.

Consolidated local and foreign currency liquidity coverage

Figures in Rand million

2015 Scenario 1 Scenario 2

Approved high-quality liquid assets 10,992.6 10,992.6

Net stressed outflows (6,580.5) (5,939.1)

Liquidity coverage ratios 167.1 % 185.1 %

2014

Approved high-quality liquid assets 9,791.2 9,791.2

Net stressed outflows (7,990.8) (7,781.8)

Liquidity coverage ratios 122.5 % 125.8 %

Structural liquidity mismatch ratios are used to ensure adequate medium- to long-term liquidity mismatch capacity. This is done

by restricting, within reasonable levels, potential future borrowing requirements related to existing business. The structural liquidity

mismatch is based on conservative cash-flow profiling with the added assumption that liquidity in the form of highquality liquid assets

are treated as readily-available (i.e. recognised in the first time bucket).



140


Consolidated local and foreign currency structural liquidity mismatch (SLM)


2015 0-18 months 18-24 months 24-36 months

Cumulative liquidity positive variance 5,105.8 4,313.7 4,651.0

Funding related liabilities 16,187.5 11,310.0 5,237.6

SLM 30.4 % 38.1 % 88.8 %

2014

Cumulative liquidity positive variance 6,971.0 8,443.4 4,091.8

Funding related liabilities 15,228.2 13,670.4 10,290.5

SLM 45.8 % 61.8 % 39.8 %

Market risk

Market risk is the risk that the value of a financial position or portfolio will decline due to adverse movements in market rates. In respect

of market risk, the Group is exposed to interest rate risk, exchange rate risk and equity price risk. Market risk is governed by the Asset

and Liability Management policy and the Asset and Liability Committee (ALCO) provides the objective oversight and makes delegated

decisions related to market risk exposures.

Interest rate risk

Interest rate risk is the risk that adverse movements in market interest rates may cause a reduction in the IDC’s future net interest

income and/or economic value of its shareholders equity

Sources of interest rate risk include:

• Repricing risk, as a result of interest-bearing assets and liabilities which reprice within different periods. This also includes the endowment effect caused by an overall quantum difference between interest-bearing assets and liabilities

• Basis risk, as a result of the imperfect correlation between interest rate changes on interest-bearing assets and liabilities which reprice within the same period (spread volatility)

• Yield curve risk, as a result of unanticipated yield curve shifts (twists and pivots)• Optionality, as a result of embedded options in the Group’s assets and liabilities. This risk is mitigated by imposing contract

breakage penalties on prepayments and early settlements

The sensitivity to interest rate shocks and/or changes in interest-bearing balances is measured by means of earnings and economic

value approaches. The former focuses on quantifying the impact on net interest income over the next twelve months whereas the

latter is used to gauge the impact on the fair market values of assets, liabilities and equity.

Interest rate sensitivity mismatch – Finance activities

RSA and RSL (Rate sensitive assets and rate sensitive liabilities)


Interest rate sensitivity mismatch – March 2015 0-3 months 4-6 months 7-12 months

Cumulative interest rate sensitivity

SA Rand 6,247.6 6,328.2 7,241.6

US Dollar 98.0 (153.4) (130.2)

Euro (26.0) (47.9) (50.6)



141



Interest rate sensitivity mismatch - March 2014 0-3 months 4-6 months 7-12 months

Cumulative interest rate sensitivity

SA Rand 6,327.6 6,444.7 6,818.1

US Dollar 56.8 (180.6) (168.3)

Euro (41.0) (59.5) (62.8)

Furthermore, interest rate risk management is monitored through the sensitivity analysis done to the financial assets and liabilities.

A 100 basis points (bps) increase/(decrease) in market interest rates resulted in the following sensitivities:

Next twelve months net interest income sensitivity

Effect of a 100 basis point increase/(decrease) in market rates:

Rand US Dollar Euro

2015

+ 100 bps rate shock 62.1 (0.6) (0.4)

- 100 bps rate shock (62.1) 0.6 0.4

2014

+ 100 bps rate shock 60.8 (0.9) (0.5)

- 100 bps rate shock (60.8) 0.9 0.5

Exchange rate risk

Exchange risk is the risk that adverse changes in exchange rates may cause a reduction in the Group’s future earnings and/or its

shareholders equity.

In the normal business, the Group is exposed to exchange rate risk, through its trade finance book and exposure to investments in and

outside Africa. The risk is further divided into:

• Transaction risk arises from transactions undertaken by the Group in a foreign currency that will ultimately require an actual conversion in the foreign exchange markets from one currency to another, thus having a direct cash effect

• Translation risk arises from the periodic translation consolidation of the financial statements of the Group and its subsidiaries and

affiliates for the purpose of uniform reporting to shareholders

Any open (unhedged) position in a particular currency gives rise to exchange rate risk. Open positions can be either short (i.e. the

Group will need to buy foreign currency to close the position) or long (i.e. the Group will need to sell foreign currency to close the

position) with the net open foreign currency position referring to the sum of all open positions (spot and forward) in a particular

currency.

For purposes of hedging, net open foreign currency positions are segmented into the following components:

• All exposures related to foreign currency denominated lending and borrowing

• All foreign currency denominated payables in the form of operating and capital expenditure, as well as foreign currency

denominated receivables in the form of dividends and fees



142


US Dollar Euro

Million Million

Net open foreign currency positions – 2015

Foreign currency lending and borrowing 4.4 (0.7)

- Loans (assets) 447.2 35.0

- Derivative hedges (FEC’s) 88.5 73.4

- Borrowings (liabilities) (531.3) (109.1)

Other net (payables) / receivables 6.0 0.3

Net open foreign currency positions 10.4 (0.4)

Net open foreign currency positions – 2014

Foreign currency lending and borrowing (0.3) 0.1

- Loans (assets) 359.1 37.3

- Derivative hedges (FEC’s) 125.6 50.0

- Borrowings (liabilities) (485.0) (87.2)

Other net receivables 10.2 0.2

Net open foreign currency positions 9.9 0.3

The Group does not hedge its exchange rate risk on foreign currency denominated shareholder loans, equity and quasi equity

investments.

Equity price risk

Equity price risk is the risk that adverse movements in equity prices may cause a reduction in the value of the Group’s investments in

listed and/or unlisted equity investments, and therefore also its future earnings and/or value of its shareholders equity.

Sources of equity price risk include:

• Systematic risk or volatility in relation to the market as a whole

• Unsystematic risk or company-specific risk factors

The investment portfolio’s beta is used as an indication of systematic risk which is not diversifiable. In light of the long-term nature of

the Group’s investments, unsystematic risk is managed by means of diversification.

Sensitivity analysis were performed on the Group’s equity portfolio, to determine the possible effect on the fair value should a range

of variables change, e.g. cash-flows, earnings, net asset values etc. These assumptions were built into the applicable valuation models.

In calculating the sensitivities for investments the key input variables were changed in a range from -10% to +10%. The effect of each

change on the value of the investment was then recorded. The key variables that were changed for each valuation technique were as

follows:

• Discounted cash-flow: Net income before interest and tax• Price earnings: Net income• Listed companies: Share price

• Forced sale net asset value: Net asset value.



143


From the table below it is evident that a 10% increase in the relevant variables, will have a R9,433 million increase in the equity

values as at 31 March 2015 (2014: R10,035 million) and a 10% decrease will lead to a R8,727 million decrease in the equity values

(2014: R9,592 million).

Period 10% increase 10% decrease

March 31, 2015 R 9,433m R 8,727m

March 31, 2014 R 10,035m R 9,592m

Capital management

The IDC is accountable to its sole shareholder, the Economic Development Department. The performance as well as management

of IDC capital is supported by the agreement between the Corporation and the shareholder in a form of the Shareholder’s Compact

which outlines the agreements between the two parties.

Regulatory capital

IDC is not required by law to keep any level of capital but has to utilise its capital to achieve the shareholder’s mandate. The IDC Act of

1940, as amended, dictates that IDC can be geared up to a 100% of its capital.

Risk appetite

The Board approved risk appetite limit serves as a monitoring tool to ensure that the impact of investment activities in the Corporation

do not have a negative impact on the Corporation’s financial position.

There were no changes to the Group’s approach to capital management during the year.

4. Fair value informationFair value hierarchy

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

This category includes instruments valued using: – quoted instruments where the valuation technique includes inputs not based

on observable data and includes instruments that are valued based on quoted prices for similar instruments where significant

unobservable adjustments or assumptions are required to reflect differences between the instruments.

Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation

technique includes inputs not based on observable data and includes instruments that are valued based on quoted prices for similar

instruments where significant unobservable adjustments or assumptions reflect differences between the instruments.



144


The table below analyses assets and liabilities carried at fair value:


Group 2015 Level 1 Level 2 Level 3 Total

Derivative assets - 4 - 4

Biological assets - - 247 247

Investment property - 299 - 299

Land and buildings - - 3,192 3,192

Aircraft - 118 - 118

Listed shares 43,519 - - 43,519

Unlisted shares - - 7,747 7,747

Preference shares - 140 5,945 6,085

Assets held for sale - 65 - 65

43,519 626 17,131 61,276

Derivative liabilities - 56 - 56

Group 2014 Level 1 Level 2 Level 3 Total

Biological assets - - 43 43


Land and buildings - - 2,520 2,520


Listed shares 63,721 - - 63,721

Unlisted equities - - 8,356 8,356


Assets held for sale - 26 - 26

63,721 768 16,711 81,200


Company 2015 Level 1 Level 2 Level 3 Total



Listed shares 21,564 - - 21,564



Investments in subsidiaries 31,964 - 11,451 43,415

Investments in associates 1,450 - 14,174 15,624

54,978 273 39,080 94,331



4. Fair value information (continued)

145



Company 2014 Level 1 Level 2 Level 3 Total

Derivative assets - 60 - 60



Listed shares 32,316 - - 32,316



Investments in subsidiaries 40,268 - 9,309 49,577

Investments in associates 1,590 - 11,131 12,721

74,174 392 34,558 109,124


Reconciliation of assets and liabilities measured at level 3

Opening balance

Gains/losses rec-ognised in

profit or loss

Gains/losses rec-ognised in other com-prehensive

income Purchases Sales Transfers

into level 3 Closing balance

Group – 2015

Assets

Biological assets 43 186 - 18 - - 247

Land and buildings 2,520 (42) 763 72 (139) 18 3,192

Unlisted shares 8,356 - (1,136) 265 (3) 265 7,747

Preference shares 5,792 (118) (319) 1,169 (579) - 5,945

16,711 26 (692) 1,524 (721) 283 17,131

Group – 2014

Assets

Biological assets 21 1 - 21 - - 43

Land and buildings 1,310 (53) 115 246 (48) 950 2,520

Unlisted shares 9,440 - (1,139) 76 (21) - 8,356

Preference shares 6,372 124 168 755 (1,627) - 5,792

17,143 72 (856) 1,098 (1,696) 950 16,711



146


Opening balance

Gains/losses rec-ognised in

profit or loss

Gains/losses rec-ognised in other com-prehensive

income Purchases Sales Transfers

into level 3 Closing balance

Company - 2015

Assets

Unlisted shares 8,327 - (1,136) 57 (3) 265 7,510

Preference shares 5,791 (118) (318) 1,169 (579) - 5,945

Investments in subsidiaries 9,309 213 (268) 3,786 (903) - 12,137

Investments in associates 11,131 (76) 2,479 1,126 (221) (265) 14,174

34,558 19 757 6,138 (1,706) - 39,766

Company - 2014

Assets

Unlisted shares 8,892 - (620) 76 (21) - 8,327

Preference shares 6,372 124 (861) 755 (599) - 5,791

Investments in subsidiaries 7,690 15 (656) 2,260 - - 9,309

Investments in associates 9,727 183 (1,258) 2,565 (86) - 11,131

32,681 322 (3,395) 5,656 (706) - 34,558

Valuation processes applied by the Group

The Group’s main instruments of monitoring the performance of its investee companies are through quarterly IMC meetings, including

but not limited to the PACS (payment and collection system) regular client review visits, as well as by way of analysis of management

accounts and audited financial statements.

The Post Investment Monitoring Department (PIMD) creates a focused approach to the monitoring of IDC investments. One of the key

monitoring activities is the IMC Equity meetings, wherein the calculations of fair values and impairments are assessed and approved by

the Committee. The IMC Equity Meetings are normally held three times per financial year, in April, August and December for reporting

periods of February, June and September respectively.

Valuation techniques using observable inputs

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making

the measurements:

Level 1

Instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted

price is readily available and the price represents actual and regularly occurring market transactions on an arm’s length basis. An active

market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

These include listed shares.




147


Level 2

Assets and liabilities valued using inputs other than quoted prices as described above for Level 1 but which are observable for the

instrument, either directly or indirectly, such as:

• Quoted price for similar assets or liabilities in an active market• Quoted price for identical or similar assets or liabilities in inactive markets• Valuation model using observable inputs

• Valuation model using inputs derived from/corroborated by observable market data

These include derivative financial instruments, investment properties and option pricing models.

Valuation techniques using unobservable inputs

Level 3

Instruments valued using inputs not based on observable data and the unobservable inputs have a significant effect on the

instruments’ valuation. This category includes instruments that valued based on quoted prices for similar instruments for which

significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Valuation techniques include price earnings, net present value and discounted cash-flow models, comparison with similar instruments

for which market observable prices exist and other valuation models. Assumptions and inputs used in valuation techniques include

risk-free and benchmark interest rates and discount rates.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the

asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

Price Earnings (PE) Valuation

The PE valuation method is the first valuation option, but has only been used in respect of companies with:

• At least 2 years’ profit history• Forecast I budgeted steady growth in profits• Is low risk• Has a good year on year performance• a long history of consistent return - operating in an industry that is not prone to fluctuations

Free Cash-Flow Valuation (FCF)

FCF is the most widely used valuation method by the Group on its Level 3 financial instruments. The below approach is

followed:

• All inputs are substantiated, especially in instances where there are prior year losses• This method is used without exception for valuing all projects and start-ups unless the going concern principle is in doubt



148


In the case where a project has a limited remaining life (e.g. Mining operations or single contract with a determined end), a separate

“Limited Life” FCF model is used.

Net Asset Value Valuation (NAV)

Forced-Sale basis

The Group uses the Forced-Sale NAV method in the following circumstances:

• Where the going concern assumption is not applicable

• Where it has been motivated that no other model is appropriate

NAV - Going Concern

The Group uses NAV (without applying forced sale) where it can be motivated that no other model is appropriate based on the

following conditions:

• An entity is consistently making losses and not meeting budgets (excluding start-up operations)• An entity has material variances between actual and budgeted figures• An entity operates in high volatile sector making it almost impossible to budget• An entity has completed all studies necessary to implement a project but has however not yet secured the necessary capital to fully

fund the implementation of the project• An entity is not fully funded and there is no clear indication that it will obtain the necessary funding to complete the project/

expansion/continue operations



149


Quantitative information about fair value measurements using significant unobservable inputs (Level 3)

Description Valuation techniques Unobservable input Range

Equity Instruments

All sectors Risk-free rate Expected long term growth

7.63% 5.00%

Agro and Food Discounted cash-flow Cost of Debt Discount factor Sector beta

5.3% - 12.3% 10.7% - 21.4% 1.00

Price-earning valuation Industry/sector PE ratioRisk Adjusted PE ratioExpected long term growth

16.43% - 21.39%9.9% - 12.8%5%

Mining Discounted cash-flow Cost of DebtDiscount factorSector beta

3.4% - 11.64%7.2% - 19.5%1.00

Chemicals Discounted cash-flow Cost of DebtDiscount factorSector beta

4.3% - 11.83%8.1% - 14%1.00

Metals Discounted cash-flow Cost of DebtDiscount factorSector beta

8.25% - 12.75%12.9% - 16%1.00

Tourism Discounted cash-flow Cost of DebtDiscount factorSector beta

9.25% - 11.25%11.9% - 15.5%1.00

SHIP Discounted cash-flow Cost of DebtDiscount factorSector beta

4.3% - 9.3%13.7% - 20.2%1.00 - 1.01

Healthcare Discounted cash-flow Cost of DebtDiscount factorSector beta

9.25% - 11.25%14.1% - 17.4%1.00

Venture Capital Discounted cash-flow Cost of DebtDiscount factorSector beta

10.25% - 14.4%16.7% - 28%1.00

Biological assets

Pecan nut trees Discounted cash-flow Pecan nut yield - tonnes per hectarePecan nut priceDiscount rateRisk of damage due to forces of nature

2 375 tonnes per hectare when mature in 9 yearsR42 per kg in shell15%10%

Walnut trees Discounted cash-flow InflationDiscount rateWalnut nut price

5%15%Prevailing market price



150


Discounted cash-flow

Significant increases in any of the inputs in isolation would result in lower fair values. Significant decreases in any of the inputs in

isolation would result in higher fair values.

Price-earning valuation

The fair value would increase (decrease) if:

• The risk-adjusted PE ratio were higher (lower) or• The expected long term growth were higher (lower)

5. Cash and cash equivalentsGroup Company


Cash and balances with bank 1,519 1,734 987 1,694

Negotiable securities 6,738 6,143 6,727 5,556

Bank overdraft (44) (106) - -

8,213 7,771 7,714 7,250

Current assets 8,257 7,877 7,714 7,250

Current liabilities (44) (106) - -

8,213 7,771 7,714 7,250

Cash and cash equivalents comprises cash deposits with banks and negotiable securities maturing within three months. These attract interest at market related rates.

6. Trade and other receivables

Trade receivables 2,869 3,164 1,065 897

Prepayments 602 421 - -

Other receivable 231 228 4 9

3,702 3,813 1,069 906

Trade and other receivables pledged as security

A subsidiary, Prilla (Pty) Ltd, entered into an invoice discounting agreement with Nedbank Limited whereby it has discounted all its debtors and has given first cession of all receivables as security for a R95 million (2014: R95 million) finance facility advanced to it.

A subsidiary, Sheraton Textiles, has ceded its trade and other receivables to the value of R35 million (2014: R32 million) to The Standard Bank of South Africa as security for its overdraft facilities.



151


Group Company


7. Inventories

Finished goods 1,136 1,100 - -

Raw materials, components 1,064 1,071 - -

Phosphate rock 973 971 - -

Consumable stores 421 436 4 13

Work in progress 259 276 - -

3,853 3,854 4 13

Group inventory to the value of R 40 million was written down as a net realisable value adjustment at 31 March 2015 (2014: R40 million).

8. Loans and advances

Loans and advances to clients* 26,559 24,667 25,580 23,986

Specific impairment of loans and advances (3,729) (3,472) (3,412) (3,311)

Portfolio impairment of loans and advances (418) (377) (408) (377)

22,412 20,818 21,760 20,298

* Interest rates range between 5% and 20%.

Reconciliation of impairment of loans and advances

Specific allowances for impairment

Balance at 1 April 3,472 2,934 3,311 2,717

Impairment loss for the year

– Charge for the year 974 1,066 1,402 1,122

– Recoveries (18) (44) (18) (44)

– Effect of foreign currency movements 3 1 3 1

Write-offs (702) (485) (1,286) (485)

Balance at 31 March 3,729 3,472 3,412 3,311

Portfolio allowance for impairment

Balance at 1 April 377 262 377 262

Impairment charge for the year 41 115 31 115

Balance at 31 March 418 377 408 377

Total allowances for impairment 4,147 3,849 3,820 3,688


152


Group Company


Maturity of loans and advances

– due within three months 1,154 2,273 1,104 2,223

– due after three months but within one year 4,198 3,371 3,656 3,059

– due after one year but within two years 4,523 4,446 4,348 4,327

– due after two years but within three years 3,857 3,847 3,722 3,756

– due after three years but within four years 3,630 3,004 3,497 2,944

– due after four years but within five years 2,331 2,995 2,278 2,940

– due after five years 6,866 4,731 6,975 4,737

– impairment of loans and advances (4,147) (3,849) (3,820) (3,688)

22,412 20,818 21,760 20,298

9. Investments

Listed equities 43,751 63,845 21,796 32,440

Unlisted equities 7,924 8,508 7,687 8,479

Preference shares 7,843 7,572 7,843 7,571

Preference shares - option values 140 211 140 211

59,658 80,136 37,466 48,701

Impairment of listed shares (232) (124) (232) (124)

Impairment of unlisted shares (177) (152) (177) (152)

Impairment of preference shares (1,898) (1,780) (1,898) (1,780)

Shares at fair value 57,351 78,080 35,159 46,645

Specific allowance for impairment

Listed equities



232 124 232 124

Unlisted equities


Impairment charge for the year 25 - 25 -

177 152 177 152

Preference shares

Balance at 1 April 1,780 1,655 1,780 1,655


1,898 1,780 1,898 1,780

Comprises:

Impairment of listed shares (232) (124) (232) (124)

Impairment of unlisted shares (177) (152) (177) (152)

Impairment of preference shares (1,898) (1,780) (1,898) (1,780)

(2,307) (2,056) (2,307) (2,056)


8. Loans and advances (continued)

153


Group Company


10. Non-current assets held-for-sale

Assets and liabilities

Non-current assets held for sale

Property, plant and equipment 47 - - -

Investment property 18 26 - -

65 26 - -

On 20 November 2013, the Board of Directors of sefa approved the sale of certain properties in the property portfolio. Investment

properties held-for-sale are current assets. Purchase offers for 6 of the 16 properties reclassified for sale has been concluded and are

awaiting registration at the relevant Deeds office. The remaining 10 properties are in the process of negotiations for sale.

The Foskor Board of Directors has taken a resolution to sell the Company aircraft. At 31 March 2015 the sale had not yet been

concluded. It is anticipated that the sale will be concluded within the next twelve months.

11. Investments in subsidiaries

Fair value of investments 36,948 44,534

Impairment of shares (107) (73)

Loans receivable 7,834 6,623

Impairment of loans (1,260) (1,507)

43,415 49,577


154


IDC subsidiaries Share class

% interest

Shares at cost and fair value

IDC net indebtedness to the holding

company

IDC net indebtedness

by the holding company

Figures in Rand million 2015 2014 2015 2014 2015 2014

Arengo 316 Ordinary 100 % - - 151 117 - -

Dymson Nominee Ordinary 100 % 2 2 44 42 - -

Findevco Ordinary 100 % - - - - (373) (373)

Foskor Ordinary 59 % 8 8 1,840 1,290 - -

Herdmans SA Ordinary 100 % - - 272 225 - -

Impofin Ordinary 100 % - - - - (88) (88)

Kindoc Investments Ordinary 100 % - - 154 158 - -

Kindoc Sandton Properties Ordinary 100 % - - 200 206 - -

Konbel Ordinary 100 % - - - - (10) (10)

Konoil Ordinary 100 % - - - - (10,009) (8,864)

Prilla Ordinary 100 % 14 14 373 366 - -

Scaw South Africa Ordinary 74 % - - 2,907 2,431 - -

Scaw South Africa Preference - 1,474 - - - - -

Scaw Metals Ordinary 100 % 45 45 - - - -

Sustainable Fibre Solutions Ordinary 100 % 4 4 125 123 - -

South African Fibre Yarn Rugs Ordinary 69 % 15 15 49 277 - -

Sheraton Textiles Ordinary 80 % - - 50 47 - -

Thelo Rolling Stock Leasing Ordinary 50 % - - 1,147 522 - -

Other Ordinary 151 176 522 819 - -

1,713 264 7,834 6,623 (10,480) (9,335)

Fair value adjustment 35,235 44,270 - - - -

Impairment adjustment (107) (73) (1,260) (1,507) - -

Fair value 36,841 44,461 6,574 5,116 (10,480) (9,335)

Legally the IDC owns 59% of Foskor, but for accounting purposes an effective 85% of Foskor is consolidated.


11. Investment in subsidiaries (continued)

155


Group Company


Profit and losses

The aggregate net profits and losses after taxation of subsidiaries attributable to the IDC were as follows:

Profits 1,211 1,139

Losses (1,701) (580)

(490) 559

Included in financing are the following investments which have been made in terms of section 3 (a) of the Industrial Development Act with the approval of the President of the Republic.

Foskor Limited - At cost - - 8 8

Sasol Limited - At cost 131 131 - -

131 131 8 8

A register of investments is available and is open for inspection at the IDC’s registered office.

Subsidiaries with material non-controlling interests

The following information is provided for subsidiaries with non-controlling interests which are material to the reporting company. The summarised financial information is provided prior to intercompany eliminations.

Subsidiary Country of incorporation% Ownership / interest held by non-controlling interest

2015 2014

Foskor RSA 15 % 15 %

Scaw RSA 26 % 26 %

The percentage ownership interest and the percentage voting rights of the non controlling interests were the same in all cases except for Foskor Limited where the voting rights were 41% (2014: 41%).



156


Summarised statement of financial positionFoskor Scaw

2015 2014 2015 2014

Assets

Non-current assets 5,100 5,075 2,658 2,245

Current assets 2,800 3,451 2,562 2,523

Total assets 7,900 8,526 5,220 4,768

Liabilities

Non-current liabilities 2,544 2,784 6,472 7,962

Current liabilities 2,092 1,951 2,090 1,113

Total liabilities 4,636 4,735 8,562 9,075

Total net assets (liabilities) 3,264 3,791 (3,342) (4,307)

Carrying amount of non-controlling interest 490 569 (869) (1,120)

Summarised statement of comprehensive income

Revenue 5,297 5,113 6,269 6,452

Other income and expenses (5,895) (5,147) (7,193) (6,676)

Profit/(loss)before tax (598) (34) (924) (224)

Tax expense 188 5 (161) 58

Profit (loss) (410) (29) (1,085) (166)

Other comprehensive income/(loss) (121) 39 574 12

Total comprehensive income/(loss) (531) 10 (511) (154)

Profit (loss) allocated to non-controlling interest (62) (5) (282) (43)

Other comprehensive income allocated to non-controlling interest (18) 6 149 3

Summarised statement of cash-flows

Cash-flows from operating activities 117 313 (51) 65

Cash-flows from investing activities (534) (744) (284) (337)

Cash-flows from financing activities 63 561 272 21

Net increase(decrease) in cash and cash equivalents (294) 130 (63) (251)

Dividend paid to non-controlling interest - - - -



157


Group Company


12. Investments in associates, joint ventures and partnerships

Associated companies 15,560 14,094 15,594 12,691

Fair value of investments – listed shares in associates - - 1,450 1,590

Fair value of investments – unlisted shares in associates - - 11,126 8,711

Impairment of shares - - (1,321) (1,240)

Net asset value at acquisition 2,175 2,026 - -

Accumulated equity-accounted income 16,886 15,847 - -

Accumulated equity-accounted losses and impairments (8,235) (7,815) - -

Loans receivable 5,705 4,928 5,748 4,910

Impairment of loans (971) (892) (1,409) (1,280)

Partnerships and joint ventures 203 163 30 30

Partners’ capital 223 172 60 60

Accumulated losses (20) (9) (30) (30)

15,763 14,257 15,624 12,721

Material associates

Companies Nature of businessAccounting

periods*Country of

incorporation % holding

Total exposure

2015

Total exposure

2014

Broadband Infraco Provides telecommunication infrastructure

RSA 26.00 % 124 364

Broodkraal Landgoed Farms table grapes 1/7/13- 30/6/14

RSA 32.00 % 80 103

Ethekwini Health and Heart Centre

Operates a hospital 1/3/14 - 28/2/15

RSA 25.48 % 149 159

Savannah Consortium Mining and processing platinum metals

RSA 29.50 % 88 68

Duferco Steel Processing

Processes steel coil RSA 50.00 % 14 65

Eastern Produce Malawi

Farms tea coffee and macadamia nuts

Malawi 26.80 % 175 141

Hans Merensky Holds investments in timber and agricultural industries

1/1/14 - 31/12/14

RSA 29.70 % 601 540

Hernic Ferrochrome Operates a ferrochrome plant

RSA 21.30 % 222 297

Hulamin Processes aluminum 1/1/14 - 31/12/14

RSA 29.90 % 1,146 1,014

Incwala Resources Platinum mining RSA 23.60 % 641 641


158



Companies Nature of businessAccounting

periods*Country of

incorporation % holding

Total exposure

2015

Total exposure

2014

Karsten Boerdery Farms table grapes and dates

1/10/13 - 30/9/14

RSA 36.60 % 303 270

KaXu Solar One Parabolic trough solar energy farm

1/1/14 - 31/12/14

RSA 29.00 % 1,803 1,301

Merafe Operates chrome and alloys plant

1/1/14 - 31/12/14

RSA 21.90 % 684 646

Mozal Produces primary aluminium metal

1/7/13 - 30/6/14

Mozambique 24.00 % 3,777 3,165

Ohorongo Cement** Cement production 1/1/14 - 31/12/14

Namibia 20.20 % - 285

Palabora Copper Mining of various minerals

1/1/14 - 31/12/14

RSA 20.00 % 1,245 1,299

Sheba’s Ridge Platinum

Produce base metals and platinum group metals

RSA 26.00 % 16 44

Umicore Catalyst Manufactures automotive catalysts

1/1/14 - 31/12/14

RSA 35.00 % 214 241

York Timber Sawmilling 1/1/14 - 31/12/14

RSA 28.70 % 688 658

Other associates Various 3,590 2,793

15,560 14,094

* The accounting periods for which the financial statements of the associated entities have been prepared,where they are different from that of the investor, are disclosed above.

** The investment in Ohorongo Cement was diluted to 16.1% during the year 2015.

Company

2015 2014

Fair value

Opening fair value of shares 9,061 8,486

Movement in fair values during the year:

Chuma/Malibongwe/Savannah Platinum SPV (10) (12)

Hans Merensky Holdings 26 107

Hernic Ferrochrome 32 (54)

Hulamin 170 133

Incwala Resources (196) (159)

Merafe (153) 186

Mozal 1,042 (1,066)

York Timber (157) (10)

Palabora Copper 979 1,088

Imbani Platinum 2 (180)

Other 459 542

11,255 9,061


12. Investments in associates, joint ventures and partnerships (continued)

159


Summarised financial information of material associates

2015


Summarised statement of comprehensive income Revenue

Profit (loss) from continuing

operations

Other comprehensive

income

Total comprehensive

income

Dividend received from

associate

Broadband Infraco 364 (268) - (268) -


364 79 - 79 -

Savannah Consortium* 2,511 (772) - (772) -

Duferco Steel Processing 1,065 (56) - (56) -

Eastern Produce Malawi 390 54 - 54 12

Hans Merensky 5,587 306 - 306 6

Hernic Ferrochrome 2,995 (529) 43 (486) -

Hulamin 8,039 385 28 413 24

Incwala Resources 1 (2) - (2) -

Karsten Boerdery 731 163 - 163 4

KaXu Solar One - (4) (170) (174) -

Merafe 3,609 214 (5) 209 10

Mozal 9,400 631 - 631 -

Palabora Copper 11,295 1,022 65 1,087 190

Umicore Catalyst 2,403 163 - 163 90

York Timber 1,415 108 (1) 107 -

Summarised statement of financial position

Non current assets Current assets

Non current liabilities

Current liabilities Total net assets

Broadband Infraco 1,318 413 2,378 242 (889)


435 142 297 58 222

Savannah Consortium* 5,216 2,452 975 1,908 4,785

Duferco Steel Processing 1,208 1,157 985 1,332 48

Eastern Produce Malawi 928 190 263 203 652

Hans Merensky 2,506 1,453 711 828 2,420

Hernic Ferrochrome 1,998 2,131 728 3,480 (79)

Hulamin 2,921 3,348 714 1,721 3,834

Incwala Resources 2,796 23 - 100 2,719

Karsten Boerdery 1,366 624 815 205 970

KaXu Solar One 7,036 201 6,203 212 822

Merafe 3,253 2,148 1,366 911 3,124

Mozal 13,938 4,361 1,821 1,533 14,945

Palabora Copper 3,084 5,565 1,513 910 6,226

Umicore Catalyst 129 830 28 320 611

York Timber 2,957 870 1,175 255 2,397



160


2014


Summarised statement of comprehensive income Revenue

Profit (loss) from continuing

operations

Other comprehensive

income

Total comprehensive

income

Broadband Infraco 302 (142) - (142)

Broodkraal Landgoed 100 (22) 12 (10)

Savannah Consortium* 249 (84) - (84)

Ethekwini Health and Heart Centre 424 58 - 58

Duferco Steel Processing 2,436 (89) (18) (107)

Eastern Produce Malawi 102 21 - 21

Hans Merensky 4,231 172 87 259

Hernic Ferrochrome 2,670 (251) (18) (269)

Hulamin 7,560 (1,345) (5) (1,350)

Incwala Resources 15 10 - 10

Karsten Boerdery 1,277 195 (6) 189

KaXu Solar One - (8) - (8)

Merafe 3,497 205 5 210

Mozal 7,416 (968) - (968)

Ohorongo Cement 702 (110) - (110)

Palabora Copper 7,862 780 - 780

Sheba’s Ridge Platinum - (1) - (1)

Umicore Catalyst 2,061 89 (1) 88

York Timber 1,238 67 (1) 66





Broadband Infraco 1,463 616 2,405 301 (627)

Broodkraal Landgoed 443 12 83 310 62

Savannah Consortium* 438 80 324 54 140


616 241 297 80 480

Duferco Steel Processing 1,061 829 384 1,376 130

Eastern Produce Malawi 782 172 234 195 525

Hans Merensky 2,196 1,437 710 783 2,140

Hernic Ferrochrome 1,946 2,052 869 2,720 409

Hulamin 2,743 2,987 631 1,696 3,403

Incwala Resources 2,796 23 - 97 2,722

Karsten Boerdery 1,214 558 743 161 868

KaXu Solar One 5,754 279 5,514 19 500

Merafe 3,100 1,904 1,314 764 2,926

Mozal 12,649 3,705 48 3,848 12,458



161


2014






Ohorongo Cement 2,214 516 1,390 196 1,144

Palabora Copper 2,967 6,414 1,668 1,220 6,493

Sheba’s Ridge Platinum 419 - 189 419 (189)

Umicore Catalyst 144 702 27 130 689

York Timber 2,888 788 1,160 226 2,290

* Financial information is for the underlying investment being Aquarius Platinum Limited.

Company2015 2014

The aggregate amounts were as follows:Non-current assets 82,966 63,332Current assets 41,056 33,363

124,022 96,695

Equity 62,220 46,921Non-current liabilities 38,795 29,319Current liabilities 23,007 20,455

124,022 96,695

Statement of Comprehensive IncomeRevenue 56,000 55,987Profits 1,761 1,767Losses (4,577) (4,587)

Partnerships and joint ventures

% interest

Total exposure

2015

Total exposure

2014Women Private Equity Fund (One) 38.83 10 9The Vantage Capital Fund Trust 100 20 21

30 30Profits 3 2

Group Company2015 2014 2015 2014

The aggregate amounts were as follows:Non-current assets 148 113 77 80Current assets 256 101 - -

404 214 77 80Equity 404 214 77 80

Statement of Comprehensive IncomeProfits 3 7 3 -Losses (25) (6) - -



162


Group Company


13. Deferred tax

Composition of deferred taxation asset is as follows:

Capital and other losses 12 328 - -

Calculated tax losses 49 61 - -

61 389 - -

Balance at the beginning of the year 389 392 - -

Calculated tax losses (153) 61 - -

Temporary differences (175) (64) - -

– Other (175) (64) - -

Balance at the end of the year 61 389 - -

Composition of deferred taxation liability is as follows:

Capital and other allowances 434 477 (662) (631)

Capital gains and losses and fair value adjustments 3,531 5,500 5,781 7,892

3,965 5,977 5,119 7,261

Reduced by taxation on: Calculated taxation losses (596) (497) - -

3,369 5,480 5,119 7,261

At beginning of the year 5,480 6,399 7,261 7,712

Calculated taxation losses (170) (202) - -

Temporary differences (1,941) (717) (2,142) (451)

– Property, plant and equipment (14) (245) 7 (1)

– Provisions (49) (114) 8 (85)

– Mining assets 54 424 - -

– Capital gains and losses and fair value adjustments (1,932) (850) (2,157) (365)

– Disallowed/exempt items - 68 - -

Balance at the end of the year 3,369 5,480 5,119 7,261


163


14. Investment propertyFigures in Rand million 2015 2015 2014 2014

Group Cost Fair value Cost Fair value

Land and buildings leased to industrialists 31 31 20 20

Land held for development 249 249 268 268

Farming land and buildings 19 19 19 19

Total 299 299 307 307

2015 2015 2014 2014

Company Cost Fair value Cost Fair value

Land and buildings leased to industrialists 15 15 15 15

Reconciliation of investment property – Group – 2015

Opening balance Additions

Classified as held for sale Transfers

Fair value adjustments Total

Land and buildings leased to industrialists

20 - - 11 - 31

Land held for development 268 3 (18) (2) (2) 249

Farming land and buildings 19 - - - - 19

307 3 (18) 9 (2) 299

Reconciliation of investment property – Group – 2014

Opening balance

Additions Classified as held for sale

Fair value adjustments

Total

Land and buildings leased to industrialists 17 1 - 2 20

Land held for development 294 - (26) - 268

Farming land and buildings 19 - - - 19

330 1 (26) 2 307

Reconciliation of investment property – Company – 2015

Opening balance Total

Land and buildings leased to industrialists 15 15

Reconciliation of investment property – Company – 2014

Opening balance Total

Land and buildings leased to industrialists 15 15


164


15. Property, plant and equipment Figures in Rand million 2015 2014

GroupCost /

Valuation

Accumulated depreciation

and impairment

Carrying value

Cost / Valuation


and impairment

Carrying value

Land and buildings 3,761 (569) 3,192 3,046 (526) 2,520

Plant and machinery 9,041 (4,248) 4,793 9,760 (5,109) 4,651

Aircraft 182 (64) 118 221 (68) 153

Furniture and fixtures 179 (148) 31 186 (120) 66

Motor vehicles 80 (30) 50 61 (27) 34

Asset under construction 1,733 - 1,733 1,588 - 1,588

Capitalised borrowing costs 4 - 4 - - -

Total 14,969 (5,048) 9,921 14,862 (5,850) 9,012

2015 2014

CompanyCost /

Valuation


and impairment

Carrying value

Cost / Valuation


and impairment

Carrying value

Plant and machinery 103 (103) - 103 (101) 2

Aircraft 182 (64) 118 166 (60) 106

Furniture and fixtures 57 (47) 10 49 (38) 11

Motor vehicles 6 (5) 1 6 (5) 1

Total 348 (219) 129 324 (204) 120


165


Reconciliation of property, plant and equipment – Group – 2015


Opening balance Additions Disposals Transfers Revaluations

Foreign exchange

movements DepreciationImpairment

lossCarrying

value

Land and buildings 2,520 89 (139) 18 763 (1) (41) (17) 3,192

Plant and machinery 4,651 714 (126) 66 - 13 (512) (13) 4,793

Aircraft 153 - - (47) 17 - (5) - 118

Furniture and fixtures 66 23 (23) - - - (35) - 31

Motor vehicles 34 21 - - - - (5) - 50

Asset under construction 1,588 333 (84) (81) - (9) - (14) 1,733

Capitalised borrowing costs - - - 4 - - - - 4

9,012 1,180 (372) (40) 780 3 (598) (44) 9,921

Reconciliation of property, plant and equipment – Group – 2014


Additions through business

combinations Disposals Transfers Revaluations DepreciationImpairment

lossCarrying

value

Land and buildings 1,310 229 20 (48) 950 115 (53) (3) 2,520

Plant and machinery 5,155 832 19 (3) (908) - (441) (3) 4,651

Aircraft 162 - - - - - (9) - 153

Furniture and fixtures 58 41 1 (1) - - (26) (7) 66

Motor vehicles 36 8 2 (4) - - (5) (3) 34

Assets under construction 1,192 412 - - (16) - - - 1,588

7,913 1,522 42 (56) 26 115 (534) (16) 9,012


15. Property, plant and equipment (continued)

166


Reconciliation of property, plant and equipment – Company – 2015


Opening balance Additions Disposals Revaluations Depreciation Carrying value

Plant and machinery 2 - - - (2) -

Aircraft 106 - - 17 (5) 118

Furniture and fixtures 11 14 (4) - (11) 10

Motor vehicles 1 - - - - 1

120 14 (4) 17 (18) 129

Reconciliation of property, plant and equipment – Company – 2014

Opening balance Additions Depreciation Carrying value

Plant and machinery 6 - (4) 2

Aircraft 110 - (4) 106

Furniture and fixtures 4 14 (7) 11

Motor vehicles 1 1 (1) 1

121 15 (16) 120

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company.

Group

2015 2014

Cost-capitalised finance lease 69 42

Accumulated depreciation (22) (20)

Carrying amount 47 22

Registers containing details of land and buildings, including details of any revaluations and encumbrances, are kept at the registered offices of the companies concerned.


15. Property, plant and equipment (continued)

167


16. Biological assetsFigures in Rand million 2015 2014

Group Cost Fair value

adjustments Fair value Cost Fair value

adjustments Fair valueMaize* 13 - 13 9 - 9Planted walnut trees** 187 - 187 4 - 4Planted pecan nut trees*** 39 - 39 25 - 25Blueberry plants**** 8 - 8 5 - 5Total 247 - 247 43 - 43

Reconciliation of biological assets – Group – 2015

Opening balance Additions Disposals

Gains or losses arising from

changes in fair value Total

Maize 9 10 (9) 3 13Planted walnut trees 4 - - 183 187Planted pecan nut trees 25 14 - - 39Blueberry plants 5 3 - - 8

43 27 (9) 186 247

Reconciliation of biological assets – Group – 2014



combinations Disposals

Gains or losses arising from

changes in fair value Total

Maize 8 8 - (8) 1 9Planted walnut trees 4 - - - - 4Planted pecan nut trees 9 16 - - - 25Blueberry plants - 2 3 - - 5

21 26 3 (8) 1 43

* Current biological assets comprise of maize which would be sold within the next 12 months. Due to the fact that there is an active market at year end and the fair value of the maize could be determined by using an external independent valuer this biological asset is measured at fair value less estimated point-of-sale cost of agricultural produce, which is determined at the point of sale harvest.

** Biological assets comprise of planted walnut trees and because there is no other commercial crop grown in South Africa or anywhere in the world with the same climate conditions or even the same tree cultivars - it is thus not possible to benchmark this project on the basis of a similar project elsewhere in the world. This is a green field project with high levels of uncertainty/risk. Although the revised project cash-flow model is the best estimate available at this time, it has a high degree of risk and past reviews indicate that the cash-flows could vary significantly over time.

*** Biological assets comprises of pecan nut trees and because the trees were only plant during the current financial year, there was too much uncertainty regarding the assumptions that would need to be made to perform an expected valuation. Therefore the pecan nut trees are carried at cost less accumulated depreciation and impairment losses.

**** There are 76.66 hectares of plants. The current density for the majority of the plants are 4,000 plants per hectare, but new plant densities at Klyne Fontein is 4,167 and 3,333 plants per hectare respectively. Fair value cannot be determined for blueberry plants as trustworthy information about the projected yields for blueberry plants is not available and any predictions about yields cannot be verified in terms of historical yields.


168


17. Intangible assetsFigures in Rand million 2015 2014

GroupCost /

ValuationAccumulated amortisation

Carrying value

Cost / Valuation

Accumulated amortisation

Carrying value

Goodwill 882 (867) 15 882 (867) 15

Computer software and other 124 (49) 75 66 (42) 24

Customer relationships 93 (93) - 93 (93) -

Intellectual Property 2 (2) - 2 (2) -

Total 1,101 (1,011) 90 1,043 (1,004) 39

Reconciliation of intangible assets – Group – 2015

Opening balance Additions Amortisation Total

Goodwill 15 - - 15

Computer software and other 24 58 (7) 75

39 58 (7) 90

Reconciliation of intangible assets – Group – 2014



combinations Amortisation TotalGoodwill 15 - 38 (38) 15

Computer software and other 15 10 - (1) 24

Intellectual Property 1 - - (1) -

31 10 38 (40) 39

18. Share capitalGroup Company

2015 2014 2015 2014AuthorisedA shares of R1 each – 1 000 000 1 1 1 1

B shares of R1 each – 1 499 000 000 1,499 1,499 1,499 1,499

1,500 1,500 1,500 1,500

IssuedOrdinary Type A 1 1 1 1

Ordinary Type B 1,392 1,392 1,392 1,392

1,393 1,393 1,393 1,393

A shares are not transferable otherwise than by an Act of Parliament, however the B shares may be sold with the authorisation of the President of the Republic of South Africa.

The A shares held by the State shall entitle it to a majority vote.


169


19. Derivative financial instrumentsGroup Company


Derivative assetsForeign exchange contract assets 4 71 - 60

Derivative liabilitiesForeign exchange contract liability 56 26 50 19

These derivative assets and liabilities are subject to master netting agreements, which allows the company to off-set the assets and liabilities, arriving at a net liability position of R50m (2014: net asset position of R41m).

All contractual maturities for the derivative assets and liabilities are within 12 months.

20. Trade and other payables

Trade payables 3,354 3,186 953 722

Accrued bonus 277 259 236 199

Accrued leave pay 117 115 73 71

3,748 3,560 1,262 992

Movement in accruals

Bonuses

Balance at the beginning of the year 259 227 199 186

Additional accruals raised during the year 274 226 211 181

Utilised during the year (256) (194) (174) (168)

Balance at the end of the year 277 259 236 199

Leave pay

Balance at the beginning of the year 115 103 71 66

Additional accruals raised during the year 25 28 22 19

Utilised during the year (23) (16) (20) (14)



170


21. Retirement benefitsPension and provident schemes

The Group has pension and provident schemes covering substantially all employees. All eligible employees are members of either defined contribution or defined benefit schemes. These schemes are governed by the Pension Funds Act, 1956, as amended. The assets of the schemes under the control of trustees are held separately from those of the Group.

The costs charged to profit or loss represent contributions payable to the scheme by the Group at rates specified in the rules of the scheme.

Defined contribution schemes

Employees and Group companies contribute to the provident funds on a fixed-contribution basis. No actuarial valuation of these funds are required. Contributions, including past-service costs, are charged to profit or loss when incurred.

Defined benefit scheme

A Group company and its employees contribute to a defined benefit pension fund. The pension fund is final salary fully funded. The assets of the fund are held in an independent trustee-administered fund, administered in terms of the Pension Funds Act, 1956, as amended.

Group Company


The fund is valued every three years using the projected unit credit method. The actuarial valuation for purposes of IAS 19 was performed on 31 December 2013.

The amounts recognised in the statement of financial position are as follows:

Present value of funded obligations 330 380

Fair value of plan assets (405) (449)

Other 75 70

Present value of unfunded obligations - 1

Liability recognised - 1

Experience adjustments on plan liabilities - (29)

Experience adjustments on plan assets - (47)

The movement in the defined benefit obligation:

Opening balance 380 1,161

Current-service cost 1 6

Interest-cost 28 42

Actuarial (gains)/losses 1 (29)

Benefit paid (29) (28)

Decrease as a result of transfer to previous shareholder* (51) (772)

Closing balance 330 380


171


Group Company


Movement in asset plan

Fair value of plan assets at beginning of the year 449 1,466

Disposal of subsidiary (50) -

Expected return on asset 34 51

Actuarial (loss)/gain recognised during the year - 47

Benefits paid (29) (29)

Decrease as a result of transfer to previous shareholder* - (1,086)

Fair value of plan assets at the end of the year 404 449

The amounts recognised in profit or loss are as follows:

Current-service cost 1 6

Interest cost 28 42

Expected return on assets (34) (51)

Net actuarial loss recognised during the year 1 -

Total included in operating expenses (4) (3)

The amounts recognised in other comprehensive income in 2015 is income of R1.1m.

The actual return on plan assets was:

Expected return on plan assets 34 51

Actuarial gains/(losses) on plan assets - 47

Actual return on plan assets 34 98

* The transfer to previous shareholder relates to Scaw

Plan assets are comprised as follows

Equity instruments 54 % 41 %

Cash 7 % 15 %

Debt instruments 30 % 23 %

Other 9 % 21 %

100 % 100 %

The principal actuarial assumptions for accounting purposes were:

Discount rate % 8.80 8.94

Expected return on plan assets % 8.80 8.94

Future salary increases % 6.00 7.73

Future pension increases % 5.00 5.72

Normal retirement age 60 60


21. Retirement benefits (continued)

172


The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:

Impact on overall liability

2015 2014

Inflation rate (increase of 1%) 8.3% increase 9.36% increase

Inflation rate (decrease of 1%) 8% decrease 7.36% decrease

The expected contributions to the post-employment pension scheme for the year ending 31 March 2016 are R0.2 million.

Post-retirement medical benefits

Some Group companies have obligations to provide post-retirement medical benefits to their pensioners.

The accumulated post-retirement medical aid obligation and the annual cost of those benefits were determined by independent actuaries. Any surplus or shortfall between the actuarially determined liability and the aggregate amounts provided is charged to profit or loss.

Group Company


The amounts recognised in the statement of financial position are as follows:

Present value of unfunded obligation:

Medical Aid Health members 707 624 182 162

Movement in the liability recognised in the statement of financial position:

At the beginning of the year 620 759 162 155

Contributions paid (21) (19) (7) (7)

Current-service costs 25 18 2 2

Interest cost 53 53 15 13

Present value of unfunded obligations - 220 - -

Reduction in obligation as a result of transfer to previous shareholder* - (382) - -

Deficit/surplus 30 (25) 10 (1)


The principal actuarial assumptions used for accounting purposes were:

– Discount rate (%) 8.80 9.20 - -

– General inflation rate (%) 6.60 6.70 - -

– Medical inflation rate (%) 8.60 8.70 - -

– Normal retirement age 59/63 59/63 - -



173


Group CompanyFigures in Rand million 2015 2014 2015 2014

Present value of unfunded obligation history Group Company2011 214 1122012 265 1352013 759 1552014 624 1622015 707 182

Present value of unfunded obligation history Change in pastservice liability Change in service cost plus assetInflation rate (increase of 1%) 14.0% increase 14.0% increase 15.1% increase 15.1% increaseInflation rate (decrease of 1%) 11.5% decrease 11.5% decrease 12.2% decrease 12.2% decrease

* The transfer to previous shareholder relates to Scaw SA.

22. Other financial liabilitiesForeign loans 7,913 6,430 7,913 6,430Domestic loans 16,092 14,920 25,653 22,587

24,005 21,350 33,566 29,017

Non-current liabilitiesForeign loans 7,023 5,178 7,023 5,178Domestic loans 10,136 12,174 8,852 9,835

17,159 17,352 15,875 15,013

Current liabilitiesForeign loans 890 1,252 890 1,252Domestic loans 5,956 2,746 16,801 12,752

6,846 3,998 17,691 14,00424,005 21,350 33,566 29,017

Foreign Loans Interest rate– US dollar 0% to 2.37% 6,459 5,108 6,459 5,108– Euro 0.25% to 5.74% 1,424 1,267 1,424 1,267– SA rand-denominated 6.25% to 6.44% 30 55 30 55

7,913 6,430 7,913 6,430

Maturity of foreign loans– due within one year 890 1,252 890 1,252– due after one year but within five years 3,308 2,590 3,308 2,590– due after five years 3,715 2,588 3,715 2,588

7,913 6,430 7,913 6,430



174


Group CompanyFigures in Rand million 2015 2014 2015 2014

Maturity of domestic loans– no set dates of repayment - - 13,301 12,752– due within one year 5,956 2,746 3,500 -– due after one year but within five years 7,661 11,722 6,894 8,842– due after five years 2,475 452 1,958 993

16,092 14,920 25,653 22,587

Domestic loansSecured loans*Nedbank Limited 1,779 2,527 - -

Other secured loans 43 29 - -

Unsecured loansRand-denominated loans 3,900 3,900 3,900 3,900

Unemployment Insurance Fund Bond 3,996 3,441 3,996 3,441

Public Bond 2,500 1,500 2,500 1,500

Public Investment Corporation Green Bond 1,956 993 1,956 993

Other unsecured loans 37 97 - -

Loans from subsidiaries with no fixed terms of repayment Interest free - - 10,480 9,335Loans with no fixed terms of repayment

Money market related 1,881 2,433 2,286 2,883

Loans with no fixed terms of repayment Interest free - - 535 535Total domestic loans 16,092 14,920 25,653 22,587

Interest and non-interest bearing loans

– Non-current interest-bearing loans 17,138 17,324 15,875 15,013– Current interest-bearing loans 6,846 3,998 6,676 4,134

23,984 21,322 22,551 19,147– Non-current interest-free loans 21 28 - -– Current interest-free loans - - 11,015 9,870

21 28 11,015 9,87024,005 21,350 33,566 29,017

* Secured by assets of subsidiary companies.


22. Other financial liabilities (continued)

175


23. ProvisionsReconciliation of provisions – Group – 2015

Figures in Rand millionOpening balance Additions

Utilised during the year

Change in discount factor Total

Environmental rehabilitation 424 8 (11) 26 447Trust fund (137) - (15) - (152)Other provisions 104 69 (52) 1 122

391 77 (78) 27 417

Reconciliation of provisions – Group – 2014


Utilised during the year Total

Environmental rehabilitation 389 41 (6) 424Trust fund (120) (17) - (137)Other provisions 106 - (2) 104

375 24 (8) 391

Reconciliation of provisions – Company – 2015

Opening balance


Environmental rehabilitation 67 (19) 48

Reconciliation of provisions – Company – 2014



Environmental rehabilitation 39 41 (13) 67

Environmental rehabilitation liability

African Chrome

As a result of the processes used in the manufacture of the chemical products of the company, the ground water has become contaminated with a by-product Chrome 6. In terms of minimum requirements of the National Water Act, 37 of 1998, Part 5, Section 20 and the Environment Conservation Act, 73 of 1989, Part V, Sub-sections 21 and 22, the company is required to remove the contaminated water and dispose of the waste material.

The Industrial Development Corporation, as primary shareholder, stands security for the entire environmental provision until the land is fully rehabilitated.

The rehabilitation process initially comprised of two phases namely Phase 1 and Phase 2. The entire process was expected to take a period of 3 years; with Phase 1 having commenced on the 1st of March 2012 and was completed during the 2013/14 financial year. Phase 2 activities commenced during 2013/14 financial after Phase 1 was completed. An amount of R 18, 5 million was expected to be incurred for Phase 2 activities, this provisional amount was based on previous historical costs and it was adjusted for inflation. It was assumed that the amount incurred each year for Phase 2 activities will be settled at each respective year end. Phase 2 activities commenced during 2013/14 financial after Phase 1 was completed.


176


During the year tests were conducted to ascertain the success of Phase 1 in rehabilitating the surface of the soil. It was found that

remediation works completed to date had effectively removed soil contamination from the surface of the site to concentration levels

well below the recently gazetted South African Soil Screening Values (SSV2) for industrial land use. The site is therefore considered

suitable for industrial re-development. However, the groundwater contamination has not been resolved giving rise to an environmental

liability for the IDC.

In-situ Chromium Reduction Technology

During the year a new remediation technology (In-situ chromium reduction) for Chromium(Cr) VI groundwater contamination was

explored. It was decided that Phase 2 would be substituted by this remediation method. In-situ chromium reduction is well proven

remediation technology for CrVI contaminated groundwater which involves the injection or infiltration of a reductive reagent to

precipitate and stabilise chromium in the less toxic form, CrIII.

The approach is as follows:

Conduct laboratory and field trials to determine most suitable reagent. Review all existing borehole and site infrastructure to

determine suitability use for the remediation trials. Design upgraded system and refine according to the results of remediation field

trials. Undertake full scale field trials to test the performance of the selected reagent. Install a combination of injection wells and/or

infiltration galleries in the hot spot areas associated with the South and North-West plumes. Sample and test existing monitoring wells

at regular intervals for p H, ORP and CrVI to monitor the reaction rate and spread of the reagent. It may be necessary to drill additional

wells to ensure aquifer coverage.

In addition the following supporting management measures have been proposed:

Semi-annual groundwater sampling between the site and residential receptors for five years obtain Waste License for Remediation

Activities and undertake the Basic Assessment for authorisation. Interest rates relating of the following government bonds were used

as the discount rates for calculating the present value of future cashflows:R186 bond for current monthly site monitoring payments to

Interwaste Environmental Solutions & Golder Associates over the next 10 years.

ZAR157 bond for the operation of in-situ reduction system for a period of two years.

ZA2023 bond for the groundwater monitoring (10 sessions over five years).

The government bonds were selected based on the approximate maturity date as at 31 March 2015. These rates were not adjusted for

risks as there is no risk relating to the technology used to rehabilitate the land.

All cash-flows were adjusted for inflation forecasted by IDC research and Information department.

Foskor

The company continually contributes to the Environmental Rehabilitation Trust to ensure that adequate funds are available to pay for

mine closure and reclamation costs. The Environmental Rehabilitation Trust is an irrevocable trust under the control of the company.

The financial assets held by the Trust are intended to fund the environmental rehabilitation liability of Foskor (Pty) Ltd and are not

available for general purposes of the group.


23. Provisions (continued)

177


The objective of the Trust is to act as the financial provider for expenditure that its member, Foskor (Pty) Ltd, is likely to incur in order

to comply with the statutory obligation for the environmental rehabilitation. The Trust is exempt from tax in accordance with Section

10(1)cP of the Income Tax Act (No. 58 of 1962).

A contingent liability has been recognised for the issuing of guarantees to the Department of Mineral Resources.

Columbus

Columbus Joint Venture was a partnership between IDC, Samancor Limited and Highveld Steel. The provision is for the rehabilitation of

dumps of different waste streams that was estimated at 4.3 million tonnes, which were not included in the sale of Middleburg Stainless

Steel in January 2002, and accordingly each partner was liable for its share of the rehabilitation.

Scaw South Africa

Scaw South Africa has an obligation to incur restoration rehabilitation and environmental costs when environmental disturbance is

caused by the development of on-going production at a property. A provision is recognised for the present value of such costs. It is

anticipated that the costs will be incurred over a period in excess of 20 years.

The estimation of the environmental rehabilitation provision is a key area where management’s judgement is required.

24. Share-based payments

On 7 July 2009 Foskor and the IDC, as the controlling shareholder of Foskor, have entered into a BEE Transaction. In terms of the

transaction the IDC has legally sold a 12% interest in Foskor to Strategic Business Partners and Special Black Groups (collectively, the

“BEE Partners”), a 6% interest in Foskor to the Foskor Employee Share Option Plan (“ESOP”), and a 9% interest in Foskor to communities

(“the Community Trust”) as part of Foskor’s efforts to achieve the objectives set out in the DTI’s Broad Based Black Economic

Empowerment Codes of Good Practice (“the DTI Codes”) and also to attain broad-based employee participation. The BEE Partners,

employee beneficiaries of the ESOP and beneficiaries of the Community Trust are collectively referred to as the “BEE Participants”.

The transaction was recognised as a share-based payment in terms of the requirements of IFRS 2 Share-based Payment and

consequently the 26% interest in Foskor sold to the BEE Participants has not been derecognised for accounting purposes in the

Company or Group. Whilst certain rewards have been transferred to the BEE Participants, the IDC remains substantially exposed to the

risks of the Foskor shares through its funding of the transaction. The transaction will continue to be accounted for in this manner until

such time as the preference shares have been redeemed by the BEE Participants. The value of the share-based payment is determined

using an appropriate valuation technique.


23. Provisions (continued)

178


Group Company


Equity-settled share-based payment reserveAt the beginning of the year 304 304 - -

At the end of the year 304 304 - -

Cash-settled share-based payment liabilityAt the beginning of the year 24 56 176 297

Fair value adjustment through profit or loss (6) (32) (114) (121)

At the end of the year 18 24 62 176

Equity-settled reserve: Weighted average fair value assumptions

The fair value of services received in return for equity instruments granted is measured by reference to the fair value of the equity

instruments granted. The estimate of the fair value of the equity instruments granted is measured based on the Monte Carlo Option

Pricing model.

The following weighted average assumptions were used in the share pricing models at grant date:

Grant date 31 Dec 2009

Initial company value (Exercise price) R’m 3,500

Average share price at grant date R’ 382.19

Annualised expected volatility (%) 43.00

Risk-free interest rate (%) 8.54

Dividend yield (%) 2.25

Strike price R’ 655.68

Cash-settled share-based payment liability: Weighted average fair value assumptions

The following weighted average assumptions were used in the share pricing models during the year:

Exercise price R’m 3,500 3,500 3,500 3,500

Average share price at grant date R’ 382.19 382. 19 382.19 382.19

Annualised expected volatility (%) 41.88 42.42 25.33 30.13

Risk-free interest rate (%) 8.37 7.87 7.92 7.59

Dividend yield (%) 0.00 6.21 2.22 0.70

Strike price R’ 594.80 598.40 546.27 526.74


24. Share-based payments (continued)

179


Group Company


25. Revenue

Farming manufacturing and mining income 13,582 13,594 - -

Interest received 2,206 2,159 2,581 2,439

Dividends received 3,104 3,723 2,238 2,757

Fee income 707 545 657 494

19,599 20,021 5,476 5,690

Dividends received on available-for-sale financial assets– Listed 2,748 3,244 1,599 2,234

– Unlisted 62 36 62 36

– Associated companies - - 283 44

– Preference shares income 294 443 294 443

3,104 3,723 2,238 2,757

Dividends received from the investments made in terms of section 3 (a) of the Industrial Development Act

Sasol Limited 1,145 1,012 - -

26. Investment revenue

Interest incomeCash and cash equivalents 533 471 416 366

Loans and advances to clients 1,641 1,672 2,157 2,071

Other 32 16 8 2

2,206 2,159 2,581 2,439

27. Finance costs paid

Current borrowings 1,205 980 1,086 892

Finance leases 3 3 - -

(Profit)/loss on foreign currency borrowings 92 (8) 66 (64)

Other interest paid 102 51 18 9

1,402 1,026 1,170 837


180


Group Company


28. Fee income

Fee incomeMetal fees 371 251 371 251

Guarantee fees 14 6 14 6

Other contract related fees 190 246 173 231

Other fees 132 42 99 6

Total fee income 707 545 657 494

29. Net capital (losses)/gains

Capital gains on disposal of available-for-sale investments 650 4 437 4

Capital losses on disposal of available-for-sale investments (10) (3) (10) (3)

640 1 427 1

30. Operating profit

Is arrived at after taking into account the following:

Loss on sale of investment property - 1 - 1

Revaluation of investment property (14) 2 - -

Depreciation on property, plant and equipment 598 534 18 16

Impairment on property, plant and equipment 44 16 - -

Profit on sale of property, plant and equipment 1 24 - -

Impairment on investment property - (2) - -

Amortisation on intangible assets 7 - - -

Research and development 6 8 5 6

Project feasibility expenses 78 145 72 136

Impairments and write-offs on other financial assets 1,526 1,584 1,821 1,776

Employee costs 3,606 3,511 903 843

Operating lease rentals 27 29 4 6

Net increase/(decrease) in impairments

Agro industries 125 (26) 91 (9)

Strategic High Impact Projects (31) (27) (30) (27)

Mining and Mineral Beneficiation 81 422 242 361

Chemicals and Allied Industries 152 70 103 57

Metals, Transportation and Machinery Products 220 45 268 83

Textiles (223) 58 (441) 224

Forestry and Wood Products (180) 270 (280) 263


181


Group Company


Media and Motion Pictures (67) 58 (64) 51

Tourism 52 (140) 63 (71)

Healthcare (35) 138 (24) 133

Green Industries 170 13 177 18

Information Communication Technology (120) 107 (109) 123

Franchising 8 (22) 8 (22)

Transportation, financial services and other 3 7 - -

Construction 377 (8) 300 (22)

Venture capital 76 (45) 80 (2)

Other 122 145 75 97

730 1,065 459 1,257

Bad debts written off / (recovered)

Food, beverage and ago industries 23 79 23 79

Strategic High Impact Projects 51 58 51 58

Mining and Mineral Beneficiation 89 - 88 -

Chemicals and Allied Industries 4 13 4 13

Metals, Transportation and Machinery Products 9 144 9 144

Textiles 250 24 655 24

Forestry and Wood Products 43 (1) 222 (1)

Media and Motion Pictures 86 - 86 -

Tourism (4) 45 (4) 45

Healthcare 63 6 63 6

Information Communication Technology 148 8 148 8

Franchising 3 4 3 4

Transportation, financial services and other - 1 - 1

Construction 11 14 10 14

Venture Capital 5 124 4 124

Other 15 - - -

796 519 1,362 519

31. Auditors’ remuneration

Fees 18 24 6 9


30. Operating profit (continued)

182


Group Company


32. Taxation

Major components of the tax (income) expense

Current

Local income tax – current period 105 528 105 524

Foreign income tax (1) (2) - -

104 526 105 524

Deferred

Deferred tax – current year (90) 31 (51) 27

Deferred tax – prior year - 3 - -

(90) 34 (51) 27

(14) 560 54 551

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate.

South African normal tax rate 28.00 % 28.00 % 28.00 % 28.00 %

The normal rate of taxation for the year has been adjusted as a consequence of:

– dividend income (53.00)% (30.00)% (37.00)% (50.00)%

– provisions and impairments 26.00 % 21.00 % 30.00 % 27.00 %

– disallowed/exempt items (26.00)% 6.00 % (18.00)% 23.00 %

Effective tax rate (25.00)% 25.00 % 3.00 % 28.00 %


183



33. Directors’ emoluments

Figures in Rand thousand

Non-executive

Fees for services as directors:

Company

2015 2014

Director

Ms MW Hlahla Retired on 29 January 2015 742 698

Ms LJ Bethlehem 486 474

Mr JA Copelyn Retired on 29 January 2015 241 152

Mr BA Dames 299 119

Ms LL Dhlamini Resigned on 31 August 2014 98 217

Mr RM Godsell 259 229

Mr LR Pitot Retired on 29 January 2015 473 370

Ms BA MabuzaAppointed Chairperson on 29 January 2015 532 310

Dr SM Magwentshu-Rensburg 335 265

Mr SK Mapetla Retired on 29 January 2015 378 308

Ms MP Mthethwa 351 265

Mr ZJ Vavi 158 77

Mr NE Zalk - -

4,352 3,484

1. Ms L Bethlehem and Mr JA Copelyn do not derive any financial benefit for services rendered to the IDC. Their fees are paid directly to HCI Limited.2. Mr NE Zalk is employed by the DTI and does not earn director’s fees for services rendered to the IDC.

184



33. Directors’ emoluments (continued)

2015 Emoluments

Long term

incentive bonus

Performance

Bonus*

Contributions to

medical aid - ER,

retirement benefits

- ER, insurance, and

other benefit Total

IDC 19 317 - 9 469 6 987 35 773

MG Qhena 4 173 - 2 755 2390 9 319

GS Gouws 2 816 - 1 580 948 5 344

SAU Meer 2 110 - 959 809 3 878

K Schumann 1 854 - 952 626 3 432

AP Malinga 1 702 - 913 806 3 421

P Makwane 1 968 - 871 344 3 182

RJ Gaveni 1 418 - 695 374 2 487

K Morolo 1 704 - 386 2 090

PM Mainganya1 1 172 - 553 170 1 895

LP Mondi2 399 - 190 135 724

Foskor 21 047 6 546 - 6 195 33 788

MA Pitse3,10 3 476 4 388 - 1 473 9 337

J Morotoba4 2 860 - - 2 175 5 035

N Nkomzwayo5,6 1 439 2 158 - 405 4 002

G Ferns7 2 457 - - 454 2 911

SMS Sibisi 2 328 - - 512 2 841

XS Luthuli 2 441 - - 385 2 826

K Cele 2 192 - - 417 2 609

NM Gokhale 1 889 - - 24 1 913

SR Golmari8 1 476 - - 98 1 574

DP Singh9 489 - - 251 740

Scaw South Africa 20 144 - 4 533 3 797 28 474

U Khumalo 3 575 - 1 278 571 5 424

M M Hanneman 3 300 - 1 180 824 5 304

S Van Wyk 1 845 - 483 441 2 769

G Van Wyk11 2 374 - - 379 2 753

B Khumalo 1 982 - 359 333 2 674

G Katergarakis 1 552 - 406 277 2 235

R Abrahams 1 559 - 317 281 2 157

V Reddy 1 283 - 278 234 1 795

D Ndlovu 1 282 - 232 238 1 752

P Malaza12 1 392 - - 219 1 611

sefa 8 419 - 1 626 1 387 11 432

TR Makhuvha 1 612 - 811 522 2 945

V Matsiliza 1 413 - 231 229 1 873

ZR Coetsee13 824 - 429 394 1 647

LG Mashishi14 1 570 - - 74 1 644

N Shwala15 1 026 - 155 45 1 226

L van Lelyveld16 515 - - 24 539

RV Ralebepa17 362 - - 56 418

185




2015 Emoluments

Long term

incentive bonus

Performance

Bonus*

Contributions to

medical aid - ER,

retirement benefits


other benefit Total

D Hansen18 397 - - 397

P Swanepoel19 327 - 36 363

GN Nadasan20 196 - - 7 203

A Dirks 124 - - - 124

L van Schalkwyk 53 - - - 53

68 927 6 546 15 628 18 366 109 467

* Represents amounts payable to executive members for achieving certain objectives that are aligned to the corporate objectives (targets). These objectives are approved by the board at the beginning of each period. The amount paid is based on the corporate, team and individuals’ performance.

1 Appointed 01 September 20142 Retired 30 June 20143 Retired on 31 August 20144 Contractual sign on bonus paid 30 June 20145 Resigned 30 November 2014 6 The long-term performance bonus paid out for N Nkomzwayo is R2.2 million made up of all the amounts that accrued to him from the previous years.7 Appointed 1 April 20148 Contract expired 31 January 20159 Appointed 1 January 201510 The long-term performance bonus paid out for MA Pitse is R4.4 million made up of all the amounts that accrued to him from the previous years.11 Appointed 1 April 201412 Appointed 4 August 201413 Appointed 1 August 201414 Resigned 31 July 2014 15 Appointed 1 July 201416 Resigned 30 June 2014 17 Appointed 1 January 201518 Contract expired 30 September 201419 Resigned 31 May 2014 20 Appointed 16 February 2015

2014 Emoluments

Long term

incentive bonus

Performance

Bonus*

Contributions to

medical aid - ER,

retirement benefits


other benefit TotalIDC 19 165 - 10 813 5 236 35 214 MG Qhena 3 948 - 2 934 1 027 7 909 GS Gouws 2 693 - 1 541 866 5 100 G van Wyk 1 953 - 1 119 794 3 866 K Schumann 1 743 - 927 589 3 259 SAU Meer 1 997 - 945 233 3 175 AP Malinga 1 727 - 923 450 3 099 P Makwane 1 836 - 885 336 3 057 LP Mondi 1 606 - 867 537 3 010 RJ Gaveni 1 331 - 672 329 2 332 K Morolo1 331 - - 75 406 Foskor 22 211 7 802 - 6 546 36 559 TJ Koekemoer 2,3,8 2 042 3 038 - 797 5 878 MA Pitse 3 257 602 - 1291 5 150 MP Mosweu 4,9 1 838 2 859 - 151 4 848 XS Luthuli 2 229 358 - 714 3 301 SMS Sibisi 2 102 365 - 815 3 281 J Morotoba 2 659 5 - 454 3 118

186




2014 Emoluments

Long term

incentive bonus

Performance

Bonus*

Contributions to

medical aid - ER,

retirement benefits


other benefit TotalK Cele 2 046 356 - 709 3 111 N Nkomzwayo 2 038 219 - 787 3 044 SR Golmari 6 1 308 - - 386 1 695 NM Gokhale 7 1 248 - - 341 1 589 A Myatt 5 1 444 - - 101 1 545 Scaw South Africa 23 035 - 351 9 109 32 495 J Kemble 1 703 38 4 210 5 951 C R Davis 2 913 - - 911 3 824 U Khumalo 3 250 - 23 523 3 796 M M Hanneman 2 676 - 43 659 3 378 G Samuels 2 006 56 522 2 584 V E Firman 1 658 - 46 519 2 223 S Van Wyk 1 591 30 413 2 034 R Abrahams 1 352 25 251 1 628 G Katergarakis 1 287 24 237 1 548 B Khumalo 1 264 216 1 480 D Ndlovu 1 181 25 223 1 429 S Manyeme 1 095 17 210 1 322 V Reddy 1 059 24 215 1 298 sefa 7 387 - 849 905 9 141 TR Makhuvha10 1 527 - 752 340 2 619 L van Lelyveld11 1 417 - - - 1 417 P Swanepoel12 1 168 - - 163 1 331 LG Mashishi 1 011 - - 217 1 228 AMA Ramavhunga13 843 - - 65 908 D Jackson14 868 - - - 868 V Matsiliza15 553 - 97 91 741 A Dirks - - - 29 29

71 798 7 802 12 013 21 796 113 409

* Represents amounts payable to executive members for achieving certain objectives that are aligned to the corporate objectives (targets). These objectives are approved by the board at the beginning of each period. The amount paid is based on the corporate, team and individuals’ performance.

1 Appointed 20 January 20142 Retired 31 December 20133 Appointed on monthly contract 1 January 2014.4 Contract terminated 30 June 20135 Appointed 1 August 2013, resigned 16 October 20136 Appointed 24 June 20137 Appointed 1 August 20138 Included in the long-term performance bonus paid out for TJ Koekemoer is R2.3 million made up of all the amounts that accrued to him from the previous years. The

balance relates to the vested portion that was deferred to the 2013/14 year for payment.9 Included in the long-term performance bonus paid out for MP Mosweu is R2.3 million made up of all the amounts that accrued to him from the previous years. The

balance relates to the vested portion that was deferred to the 2013/14 year for payment.10 Mr T Makhuvha has been seconded to the company by the Industrial Development Corporation (IDC) and no remuneration has been paid to him by sefa.11 Appointed 15 April 201312 Appointed 1 July 201313 Resigned 30 November 201314 Resigned 31 October 201315 Appointed 1 July 2013

187


34. Other comprehensive income

Figures in Rand million Gross Tax

Share of other comprehensive

income of associates Net

Components of other comprehensive income – Group – 2015

Items that will not be reclassified to profit or loss

Remeasurements on net defined benefit liability/assetRemeasurements on net defined benefit liability/asset (17) 2 - (15)

Movements on revaluationGains (losses) on property revaluation 780 (175) - 605Total items that will not be reclassified to profit or loss 763 (173) - 590

Items that may be reclassified to profit or loss

Exchange differences on translating foreignoperationsExchange differences arising during the year (3) - 488 485

Available-for-sale financial assets adjustmentsGains and losses arising during the year (21,789) 1,889 208 (19,692)

Other reservesOther reserves from subsidiaries (156) 29 - (127)Total items that may be reclassified to profit or loss (21,948) 1,918 696 (19,334)Total (21,185) 1,745 696 (18,744)

Components of other comprehensive income – Group – 2014


Remeasurements on net defined benefit liability/assetRemeasurements on net defined benefit liability/asset 19 - - 19

Movements on revaluationGains (losses) on property revaluation 115 (21) - 94Total items that will not be reclassified to profit or loss 134 (21) - 113

Items that may be reclassified to profit or lossExchange differences on translating foreign operationsExchange differences arising during the year (49) - 433 384

Available-for-sale financial assets adjustmentsGains and losses arising during the year 7,626 974 (755) 7,845

Other reservesOther reserves from subsidiaries (10) - - (10)Total items that may be reclassified to profit or loss 7,567 974 (322) 8,219Total 7,701 953 (322) 8,332

188


Figures in Rand million Gross Tax

Share of other comprehensive

income of associates Net

Components of other comprehensive income – Company – 2015


Remeasurements on net defined benefit liability/asset

Remeasurements on net defined benefit liability/asset (10) - - (10)

Movements on revaluation

Gains (losses) on property revaluation 17 7 - 24

Total items that will not be reclassified to profit or loss 7 7 - 14


Available-for-sale financial assets adjustments

Gains and losses arising during the year (18,700) 2,083 (23) (16,640)

Total items that may be reclassified to profit or loss (18,700) 2,083 (23) (16,640)

Total (18,693) 2,090 (23) (16,626)

Components of other comprehensive income – Company – 2014


Remeasurements on net defined benefit liability/asset

Remeasurements on net defined benefit liability/asset 1 - - 1

Movements on revaluation

Gains (losses) on property revaluation 1 - - 1

Total items that will not be reclassified to profit or loss 2 - - 2


Available-for-sale financial assets adjustments

Gains and losses arising during the year 7,146 478 (20) 7,604

Total 7,148 478 (20) 7,606


34. Other comprehensive income (continued)

189



35. Nature and purpose of reservesForeign currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign

operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in a foreign

operation.

Revaluation reserve

The revaluation reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the assets are

derecognised or impaired. The revaluation reserve also relates to the revaluation of property, plant and equipment.


The associated entities reserve comprises the cumulative net changes of equity accounted investment, directly to other comprehensive

income.

Common control reserve

The common control reserve relates to the transfer of sefa from the Economic Development Department to the IDC. Please refer to

Note 38 for further detail.


The share-based payment reserve relates to the equity-settled portion share-based portion of the Foskor BEE transaction, entered into

on 7 July 2009. Please refer to Note 24 for further detail.

190


Group Company


36. Financial and operating leases

Finance leases – Group as lessee

The Group has leases classified as financial leases principally for property. Future minimum lease payments payable under finance leases, together with the present value of minimum lease payments, are as follows:

Land and buildings

– due within one year 5 6 - -

– due after one year but within five years 14 16 - -

– due after five years 7 10 - -

Total minimum lease payments 26 32 - -

Amount representing finance charges (10) (12) - -

Present value of minimum lease payments 16 20 - -

Current portion 3 3 - -

Long-term portion 13 17 - -

16 20 - -

Foskor

The finance lease is between Foskor (Pty) Limited and uMhlathuze Water Board for an effluent pipeline.

The lease liability is effectively secured, as the rights to the leased asset revert to the lessor in the event of default. The lease is over a 20-year period with 11 years remaining as at 31 March 2015. Foskor has sole use of the effluent pipeline and pays for the maintenance. The lease is at a fixed rate of 14.4% per annum.

Omega Refrigeration

The company’s obligation under the finance lease have been settled during the current financial year.

Blue Mountain Berries

These loans are repayable in monthly installments of R131 861 which includes interest at rates between 8.5% and 9.55% per year.


191



Group Company


Operating leases – Group as lessee

Certain items of computer and office equipment are leased by the Group.

Commitments for future minimum rentals payable under non-cancellable leases are as follows:

– due within one year 28 29 2 2

– due after one year but within five years 105 139 2 5

– due after five years 302 299 - -

435 467 4 7

The company leases network printers and scanners under one agreement, which terminates in 2016.

37. Cash used in operations

Profit before taxation 1,639 2,203 1,693 1,955

Income from equity accounted investments (656) 310 (3) (2)

Adjustments for:

Impairment of goodwill relating to associated entities (54) (218) - -

Amortisation of intangibles assets 7 40 - -

Depreciation of property, plant and equipment 598 534 18 16

Profit on sale of assets 1 24 - -

Impairment of property, plant and equipment 44 16 - -

Net capital gains (640) (1) (427) (1)

Interest received (2,206) (2,159) (2,581) (2,439)

Dividends received (2,810) (3,280) (1,944) (2,314)

Dividends received-preference share options (294) (443) (294) (443)

Finance costs paid 1,310 1,034 1,104 901

Finance cost: Exchange gains and losses 92 (8) 66 (64)

Project feasibility expenses - 20 6 12

Specific and portfolio impairments 1,526 1,584 1,821 1,776

Fair value adjustment on share based payment - - (114) (121)

Movements in retirement benefit assets and liabilities 89 (135) 20 7

Movements in provisions 26 16 (19) 28

Changes in working capital:

Inventories 1 (454) 9 (2)

Trade and other receivables 111 (828) (163) (116)

Derivative assets 67 43 60 (11)

Trade and other payables 216 345 298 118

Increase in non-current assets held-for-sale (39) (26) - -

(972) (1,383) (450) (700)

192


Group Company


38. Business combinations

Other entities acquired

Fair value of assets acquired and liabilities assumed

Property, plant and equipment - 42 - -

Other assets - 65 - -

Inventories - 10 - -

Trade and other receivables - 24 - -

Cash and cash equivalents - 20 - -

Other liabilities - (176) - -

Trade and other payables - (25) - -

- (40) - -

39. Tax (paid) refunded

Balance at beginning of the year (41) (120) (42) (116)

Current tax for the year recognised in profit or loss (104) (526) (105) (524)

Balance at end of the year (261) 41 (260) 42

(406) (605) (407) (598)

40. Commitments

In respect of:

Undrawn financing facilities approved 27,645 28,996 27,442 28,996

Undrawn guarantee facilities approved 1,087 921 1,087 921

Capital expenditure approved by subsidiaries 263 706 - -

– Contracted 263 325 - -

– Not contracted - 381 - -

Capital expenditure approved by equity-accounted investments 398 461 - -

– Contracted 217 152 - -

– Not contracted 181 309 - -

Total commitments 29,393 31,084 28,529 29,917

Less: counter-guarantees obtained from partners in respect of financing and guarantees to be provided to major projects (182) (158) (182) (158)

Commitments net of counter-guarantees 29,211 30,926 28,347 29,759

Commitments will be financed by loans and internally generated funds.


193



Group Company


41. Guarantees

Guarantees issued in favour of third parties in respect of finance provided to industrialists 1,265 1,025 1,061 920

Total industrial financing guarantees 1,265 1,025 1,061 920

1,265 1,025 1,061 920

Sundry guarantees issued by subsidiaries 541 501 - -

Guarantees issued by equity-accounted investments 22 169 - -

Guarantees 1,828 1,695 1,061 920

42. ContingenciesContingent liabilities of subsidiaries

Foskor (Pty) Limited

The company had mine rehabilitation guarantees amounting to R455 million at year end. In line with the requirements set out by the

Department of Mineral Resources (DMR), this amount of R455 million (2014: R413 million) was in place at 31 March 2015.

These guarantees and the agreement reached with the DMR were based on the environmental rehabilitation and closure costs

assessment that was performed during the 2015 financial year. The assessments are performed on a three-year rolling basis, with the

next assessment due in 2018. Estimated scheduled closure costs for the mine are R518 million.

For unscheduled or premature closure, the DMR, in accordance with Minerals and Petroleum Resources Development Act, requires

Foskor (Pty) Ltd to provide for the liability of R597 million in the form of guarantees and cash. The R597 million is covered by guarantees

totalling R455 million and investment assets totalling R152 million, resulting in an overprovision of R10 million.

Contingent liabilities of equity accounted investments

Hans Merensky Holdings (Pty) Limited

Land claims against property held by the Group have been gazetted in terms of the Restitution of Land Rights Act, 1994. In the opinion

of the directors, after taking appropriate legal advice, the outcome of such actions cannot be reliably predicted and measured at

reporting date and consequently no impairment charge has been recognised. Gazetted land claims will have a financial impact if it is

probable that there will be an outflow of economic interest from the Hans Merensky Group. When the financial loss becomes probable

and can be reliably measured, an impairment charge will be recognised.

The York Timber Organisation Limited (York)

Suretyship: York participates in pool banking facilities granted by First Rand Bank Limited. As such, York has provided unlimited

suretyship in favour of First Rand Bank Limited in respect of its obligations to the bank. Obligations are R142 million (2014: R85 million),

R24 million being the Group’s exposure thereto.

194


43. Related partiesShareholder: The Government of South Africa through the Economic Development Department

Figures in Rand millionDirectors’ interests Financing balance

R’m CompanyFinancing approved 2015 2014

Interest/funding rate

Type of financing/repayment terms Director’s interest

Year of approval

Mr SK Mapetla*

Afrika Biopharma Investment

18 18 18 7% Working Capital Facility

Mr SK Mapetla owns 41% in Afrika Boipharma Investment

2010

Ms MW Hlahla*

Clidet 688 T/A Praxley Consortium Five (Pty) Ltd

14 14 14 RATIRR of 8%

Redeemable preference shares

Ms MW Hlahla owns 14% in Praxley Consortium Five (Pty) Ltd

2007

Mr JA Copelyn*

Cape Town Film Studio (Pty) Ltd

84 64 73 Prime + 1% Normal Loan The controlling shareholders of Cape Town Film Studio are Sabido Investments (Pty) Ltd(Sabido) and Videovision Dreamworld. Sabido (42.5% shareholding ) is the holding company of ETV and part of the JSE- listed group Hosken Consolidated investments Limited (“HCI”). Mr Copelyn currently serves as CEO of HCI

2010

Ilangalethu (Pty) Ltd

1,000 60 - R186 + (3.2% to 3.4%)

Senior Debt Loan

Hosken Consolidated investments Limited (“HCI”) has a 10% stake in Ilangalethu (Pty) Ltd. Mr Copelyn currently serves as CEO of HCI

2013

1,484 - - RATIRR of 7.04%


2013


195



Group Company


Related party transactions

Non-financing transactions - Rendering of services

Eskom Limited 754 757 - -

Transnet Limited 892 771 - -

South African Airways (Pty) Limited 21 20 20 13

Telkom Limited 7 7 1 2

National Ports Authority 43 17 - -

SA Post Office Limited 1 1 1 1

Council for Scientific and Industrial Research - 1 - -

Rand Water 5 4 - -

1,723 1,578 22 16

Directors’ interests Financing balance

R’m CompanyFinancing approved 2015 2014

Interest/funding rate

Type of financing/repayment terms Director’s interest

Year of approval

Ms LJ Bethlehem

Cape Town Film Studio (Pty) Ltd

84 64 73 Prime + 1% Normal loan The controlling shareholders of Cape Town Film Studio are Sabido Investments (Pty) Ltd(Sabido) and Videovision Dreamworld. Sabido (42.5% shareholding ) is the holding company of ETV and part of the JSE- listed group Hosken Consolidated investments Limited (“HCI”). Ms Bethlehem is a senior manager at HCI

2010

Ilangalethu (Pty) Ltd

1,000 60 - R186 + (3.2% to 3.4%)

Senior Debt Loan

Hosken Consolidated investments Limited (“HCI”) has a 10% stake in Ilangalethu (Pty) Ltd. Ms Bethlehem is a senior manager at HCI

2013

1,484 - - RATIRR of 7.04%


2013

National sphere of governmentThe Land & Agricultural Develop-ment bank of SA Ltd

250 86 100 0% Loan repayable on 31 March 2022

2010

*Retired on 29 January 2015

43. Related parties (continued)

196


196

Acronyms and abbreviations

AFD Agence Française de Développement ALCO Asset and Liability CommitteeAPAP Agricultural Policy Action PlanAPCF Agro Processing Competitiveness FundAPDP Automotive Production Development ProgrammeAPI Active Pharmaceutical IngredientAPORDE African Programme on Rethinking Development

EconomicsBAC Board Audit CommitteeB-BBEE Broad-based black economic empowermentBEE Black economic empowerment CADFund China-Africa Development FundCEO Chief executive officerCO2 Carbon dioxideCOP Conference of PartiesCSI Corporate social investmentCTCP Clothing and Textiles Competitiveness ProgrammeCTFL Clothing, textiles, footwear and leatherCTCP Clothing and Textiles Competitiveness ProgrammeDAFF Department of Agriculture, Forestry and FisheriesDFI Development finance institutionDIRCO Department of International Relations and

CooperationDMTN Domestic Medium-Term Note programmeDoE Department of EnergyDoT Department of TransportDRC Democratic Republic of Congodti Department of Trade and Industry (the dti)DWCPD Department of Women, Children and People with

DisabilitiesE&S Environmental and socialECIC Export Credit Insurance Corporation of South Africa

LimitedEDD Economic Development Department ERM Enterprise risk managementERMF Enterprise-wide risk management frameworkESRR Environmental and social risk ratingEWP Employee wellness programmeEXCO Executive Management CommitteeFMCG Fast moving consumer goodsGDP Gross domestic productGEEF Green Energy Efficiency FundGHG Greenhouse gasGRI G4 Global Reporting Initiative Guidelines 4HIV Human immunodificiency virusIA Internal AuditICT Information and communications technologyIDC Industrial Development Corporation of South Africa

LimitedIFRS International Financial Reporting Standards

IMC Investment Monitoring CommitteeIPAP Industrial Policy Action PlanIPP Independent power producerIRC Integrated Report CommitteeIRR Internal rate of returnISAE International Standards for Assurance Engagements KfW KfW German Development Bankktonne Kilo tonnekW KilowattLED Local economic developmentLPG Liquid petroleum gasMinMec Minister and Members of Executive CouncilMOGS Mining, oil and gas servicesMoU Memorandum of understandingMSSL Motherson Sumi Systems LimitedMVA Manufacturing value addedMW MegawattMWh Megawatt hourNDP National Development PlanNGO Non-governmental organisationNGP New Growth PathNIP National Infrastructure PlanNT National TreasuryNYDA National Youth Development AgencyPAC-BP Pan African Capacity Building ProgrammePFMA Public Finance Management ActPIC Public Investment CorporationPICC Presidential Infrastructure Coordinating

CommissionPPP Public-Private PartnershipPRASA Passenger Rail Agency of South AfricaPV PhotovoltaicR&D Research and developmentREIPPPP Renewable Energy Independent Power Producer

Procurement ProgrammeSBU Strategic business unitScaw Scaw Metals Group South Africasefa Small Enterprise Finance Agency SOC Limited SIP Strategic integrated projectSMALLS Small Independent Power Producer ProgrammeSME Small- and medium-sized enterpriseSMME Small-, micro- and medium-sized enterpriseSNG SizweNtsalubaGobodoSOE State Owned enterpriseTVET Technical vocational education and trainingUIF Unemployment Insurance FundUNEP-FI United Nations Environment Programme – Finance

InitiativeUWC University of the Western CapeW&R Workout and Restructuring Department

197

Administration

DirectorsExecutive

MG Qhena

GS Gouws (alt)

Non-Executive

BA Mabuza (Chairperson)

LI Bethlehem

BA Dames

RM Godsell

SM Magwentshu-Rensburg

NP Mnxasana

B Molefe

PM Mthethwa

ND Orleyn

ZJ Vavi

NE Zalk

Auditors

KPMG (Johannesburg)

SizweNtsalubaGobodo (Johannesburg)

Registered Office

IDC

19 Fredman Drive

Sandown 2196

PO Box 784055

Sandton 2146

Telephone +27 (11) 269 3000

Fax: +27 (11) 269 3116

Email: [email protected]

Email: [email protected]

Call centre contact number: 0860 693 888

Website: www.idc.co.za

Company Secretary

P Makwane

Registration number:

1940/014201/06

198


Contact us

Head office19 Fredman Drive, Sandown

PO Box 784055, Sandton 2146, South Africa

Telephone +27 (11) 269 3000 Fax: +27 (11) 269 3116

Email: [email protected] Call Centre: 0860 693 888

Regional offices

Eastern Cape:

East London2nd Floor Block B, Chesswood Office Park,

Winkley Street, Berea, East London

PO Box 19048, Tecoma 5214

Tel: 043 721 0733/4777 Fax: 043 721 0735

UmtataGround Floor, ECDC House, 7 Sisson Street,

Fort Gale, Mthatha, 5201

Tel: 047 504 2200 Fax: 047 504 2201

Port ElizabethSouthern Life Gardens, Block A (Ground)

70 2nd Avenue, Newton Park, Port Elizabeth

PO Box 27848, Greenacres, Port Elizabeth 6057

Tel 041 363 1640 Fax : 041 363 2349

Free State: BloemfonteinMazars Building, 46 1st Avenue, Westdene, Bloemfontein

Private Bag X 11, Suite 25, Brandhof 9324

Tel: 051 411 1450 Fax: 051 447 4895

KwaZulu-Natal:

DurbanSuite 2101, 21st Floor, The Embassy Building,

199 Anton Lembede Street, Durban

PO Box 2411, Durban 4000

Tel: 031 337 4455 Fax: 031 337 4790

Pietermaritzburg1st Floor, ABSA Building, 15 Chatterton Road, Pietermaritzburg

PO Box 2411, Durban 4000

Tel: 033 328 2560 Fax: 033 342 5341

Limpopo: PolokwaneSuite 18, Biccard Office Park, 43 Biccard Street, Polokwane

Postnet Suite 422, Private Bag X9307, Polokwane 0699

Tel: 015 299 4080 - 4099 Fax: 015 295 4521

Mpumalanga: MbombelaSuite 702, Maxsa Building

cnr Ferreira and Streak streets

Mbombela

PO Box 3740, Mbombela 1200

Tel: (013) 752 7724 Fax: (013) 752 8139

Northern Cape:

KimberleySanlam Business Complex, 13 Bishops Avenue,

Kimberley 8301

PO Box 808, Kimberley 8300

Tel: 053 807 1050 Fax: 053 832 7395

UpingtonDe Drift Plaza, Block 6, Olyvenhoutsdrift Settlement,

Louisvale Avenue, Upington 8800

Tel: 054 337 8600 Fax : 054 334 0835

North West:

BritsSuite 108, Safari Centre, 28 Van Velden Street, Brits

Tel: 012 252 0008 Fax: 012 252 4657

Mahikeng1B Mikro Plaza, cnr First Street/Bessemer Street,

Industrial Sites Mahikeng

Postnet Suite 89, Private Bag X2230, Mahikeng South 2791

Tel: 018 397 9942 Fax: 018 397 9979

Rustenburg1st Floor, Sunetco Building, 32B Heystek Street, Rustenburg

Postnet Suite 290, Private Bag X 82245, Rustenburg 0030

Tel : 014 591 9660/1 Fax: 014 592 4485

Western Cape: Cape Town2817, 28th Floor ABSA Centre, 2 Riebeeck Street, Cape Town

PO Box 6905, Roggebaai 8012

Tel: 021 421 4794 Fax: 021 419 3570

199

Satellite offices

Free State:

PhuthaditjhabaMapoi Road, Phuthaditjaba, 9869

Tel 051 411 1450

Welkom1 Reinet Street, Welkom, 9460

Tel 051 411 1450

KwaZulu-Natal: Richards BaySuite 17, Partidge Place, cnr Lira Link and Tasselberry Road,

Richards Bay, 3900

Tel: 031 337 4455

Limpopo:

ThohoyandouSeda office: Old Mutual Building, Old Group Scheme Offices,

Mphephu Road, Thohoyandou 7950

Tel: 015 299 4080

Tzaneen1st Floor Prosperitas Building, 27 Peace Street, Tzaneen (Seda),

0850

Tel: 015 299 4080

Mpumalanga:

eMalahleni23 Botha Avenue cnr Rhodes Street, Hi-Tech House,

eMalahleni 1035

Tel: 013 752 7724

SecundaSouth Wing, Municipal Building Lurgi Square, Secunda 2302

Tel: 013 752 7724

North West:

KlerksdorpOffice 35, West End Building, 51 Leask Street, Klerksdorp, 2571

Tel 018 462 6586 Fax: 018 462 5061

(Dr KK District Municipality Economic Agency)

Vryburg83 Vry Street, Vryburg, 8601

Tel 053 927 0590 Fax: 053 927 0590

Western Cape: GeorgeBeacon Place, 125 Meade Street, George 6529

Tel: 021 421 4794

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Notes:

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Notes:

202


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204


RP:316/2015

ISBN: 978-0-621-44012-6

Design and layout:www.blackmoon.co.za

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